Affine processes on positive semidefinite matrices

Christa Cuchiero; Damir Filipović; Eberhard Mayerhofer; Josef Teichmann

doi:10.1214/10-AAP710

Affine processes on positive semidefinite matrices

Christa Cuchiero
, Damir Filipović
, Eberhard Mayerhofer
, Josef Teichmann

Research output: Contribution to journal › Article › peer-review

Abstract

This article provides the mathematical foundation for stochastically continuous affine processes on the cone of positive semidefinite symmetric matrices. This analysis has been motivated by a large and growing use of matrixvalued affine processes in finance, including multi-asset option pricing with stochastic volatility and correlation structures, and fixed-income models with stochastically correlated risk factors and default intensities.

Original language	English
Pages (from-to)	397-463
Number of pages	67
Journal	Annals of Applied Probability
Volume	21
Issue number	2
DOIs	https://doi.org/10.1214/10-AAP710
Publication status	Published - Apr 2011
Externally published	Yes

Keywords

Affine processes
Stochastic invariance
Stochastic volatility
Wishart processes

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10.1214/10-AAP710

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abstract = "This article provides the mathematical foundation for stochastically continuous affine processes on the cone of positive semidefinite symmetric matrices. This analysis has been motivated by a large and growing use of matrixvalued affine processes in finance, including multi-asset option pricing with stochastic volatility and correlation structures, and fixed-income models with stochastically correlated risk factors and default intensities.",

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AB - This article provides the mathematical foundation for stochastically continuous affine processes on the cone of positive semidefinite symmetric matrices. This analysis has been motivated by a large and growing use of matrixvalued affine processes in finance, including multi-asset option pricing with stochastic volatility and correlation structures, and fixed-income models with stochastically correlated risk factors and default intensities.

KW - Affine processes

KW - Stochastic invariance

KW - Stochastic volatility

KW - Wishart processes

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Affine processes on positive semidefinite matrices

Abstract

Keywords

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