Polynomial diffusions and applications in finance

@article{Filipovi2016PolynomialDA,
  title={Polynomial diffusions and applications in finance},
  author={Damir Filipovi{\'c} and Martin Larsson},
  journal={Finance and Stochastics},
  year={2016},
  volume={20},
  pages={931-972}
}
This paper provides the mathematical foundation for polynomial diffusions. They play an important role in a growing range of applications in finance, including financial market models for interest rates, credit risk, stochastic volatility, commodities and electricity. Uniqueness of polynomial diffusions is established via moment determinacy in combination with pathwise uniqueness. Existence boils down to a stochastic invariance problem that we solve for semialgebraic state spaces. Examples… 
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67 Citations
Highly Influential Citations
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Background Citations
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Methods Citations
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Results Citations
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67 Citations

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