Quotation Kurt, Kevin, Frey, Rüdiger. 2020. Markov-modulated Affine Processes. Vienna Seminar in Mathematical Finance and Probability, Vienna, Austria, 15.10.




We introduce Markov-modulated affine processes, a class of stochastic processes that emerge from affine processes by allowing some of their coefficients to be a function of an exogenous Markov process. Our proposed extension preserves the tractability of affine processes and allows for richer models in various financial applications. We prove existence of Markov-modulated affine processes via a martingale problem approach. Our framework unifies and generalizes a number of established models. On top of that, we introduce novel models, which are capable of capturing empirical features of financial data that are not explainable by means of standard affine processes, but are at the same time easy to calibrate.


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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Paper presented at an academic conference or symposium
Language English
Title Markov-modulated Affine Processes
Event Vienna Seminar in Mathematical Finance and Probability
Year 2020
Date 15.10.
Country Austria
Location Vienna
URL https://fam.tuwien.ac.at/events/vs-mfp/


Kurt, Kevin (Former researcher)
Frey, Rüdiger (Details)
Institute for Statistics and Mathematics IN (Details)
Research areas (ÖSTAT Classification 'Statistik Austria')
1137 Financial mathematics (Details)
1165 Stochastics (Details)
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