HEDGING OPTIONS IN A DOUBLY MARKOV-MODULATED FINANCIAL MARKET VIA STOCHASTIC FLOWS
Bibliographic record
Abstract
The hedging of a European-style contingent claim is studied in a continuous-time doubly Markov-modulated financial market, where the interest rate of a bond is modulated by an observable, continuous-time, finite-state, Markov chain and the appreciation rate of a risky share is modulated by a continuous-time, finite-state, hidden Markov chain. The first chain describes the evolution of credit ratings of the bond over time while the second chain models the evolution of the hidden state of an underlying economy over time. Stochastic flows of diffeomorphisms are used to derive some hedge quantities, or Greeks, for the claim. A mixed filter-based and regime-switching Black–Scholes partial differential equation is obtained governing the price of the claim. It will be shown that the delta hedge ratio process obtained from stochastic flows is a risk-minimizing, admissible mean-self-financing portfolio process. Both the first-order and second-order Greeks will be considered.
Fetched live from OpenAlex and de-inverted. Abstracts are not stored in this database: the inverted indexes are 8.6 GB of the frame’s 9.3 GB of text, and the host has 13 GB free.
How this classification was reachedexpand
Full frame machine prediction
Teacher imitationNot calibrated prevalence, not ground truth. Human validation pending. The Gemma side is a direct model label for every work in the frame, read from the title-only record. The Codex side is a classifier learned from the 10,348 direct Codex labels and calibrated to design-weighted sample rates; fields without enough sample support carry no Codex call. Candidate is the union of the two sides; consensus is their intersection. These outputs are machine_predicted_unvalidated and are not human labels.
Distilled classifier scores by category (both heads)
| Category | Codex | Gemma |
|---|---|---|
| Metaresearch | 0.002 | 0.004 |
| Meta-epidemiology (narrow) | 0.001 | 0.001 |
| Meta-epidemiology (broad) | 0.001 | 0.001 |
| Bibliometrics | 0.001 | 0.000 |
| Science and technology studies | 0.000 | 0.002 |
| Scholarly communication | 0.002 | 0.002 |
| Open science | 0.001 | 0.001 |
| Research integrity | 0.002 | 0.001 |
| Insufficient payload (model declined to judge) | 0.002 | 0.000 |
Machine scores (provisional)
The two teacher heads of the student model, read on this work. A score orders the frame for review; it never asserts a category, and the validation status ships verbatim with every row.
Baseline scores from an immature model (maturity gate not passed, 7 training rounds). Scores rank; they never assert a category.
score_only:v0-immature-baseline · verbatim from the scoring run: score_only means the number may rank works, and no category label ships from itClassification
machine, unvalidatedMachine predicted; a candidate call from one source (direct Gemma or distilled Codex), not a consensus.
How this classification was reached, model by model and score by score, is at the end of the page under "How this classification was reached".