Montag, 11. April 2016, 16:45 - 18:15 iCal

ISOR Colloquium

"Polynomial Processes in Stochastic Portfolio Theory"

Speaker: Christa Cuchiero (Univ. Vienna)

Sky Lounge OMP1, 12th Floor
Oskar-Morgenstern-Platz 1, 1090 Vienna


Inspired by volatility stabilized market models introduced by Robert Fernholz and Ioannis Karatzas [2], we introduce a class of processes which are polynomial in the sense of [1] to model both, asset prices (or market capitalizations of companies in an equity market) and their corresponding market weights. More precisely, we characterize the class of polynomial diffusion models for the asset price process whose market weights process is again a polynomial diffusion process on the unit simplex. Explicit parameter conditions assuring the existence of relative arbitrages with respect to the market portfolio are given and the connection to non-attainment of the boundary is discussed. We also consider extensions to models with jumps and the computation of optimal relative arbitrage strategies.


[1] C. Cuchiero, M. Keller-Ressel, and J. Teichmann. Polynomial processes and their applications to mathematical finance. Finance and Stochastics, 16(4):711-740, 2012.

[2] R. Fernholz and I. Karatzas. Relative arbitrage in volatility-stabilized markets. Annals of Finance, 1(2):149-177, 2005.

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Institut für Statistik und Operations Research


Mag. Vera Lehmwald
Fakultät für Wirtschaftswissenschaften
Institut für Statistik und Operations Research
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