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Affine processes on positive semidefinite matrices

Author

Listed:
  • Christa Cuchiero
  • Damir Filipovi'c
  • Eberhard Mayerhofer
  • Josef Teichmann

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 matrix-valued 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.

Suggested Citation

  • Christa Cuchiero & Damir Filipovi'c & Eberhard Mayerhofer & Josef Teichmann, 2009. "Affine processes on positive semidefinite matrices," Papers 0910.0137, arXiv.org, revised Apr 2011.
    • Handle: RePEc:arx:papers:0910.0137
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    References listed on IDEAS

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    1. JosE Da Fonseca & Martino Grasselli & Claudio Tebaldi, 2008. "A multifactor volatility Heston model," Quantitative Finance, Taylor & Francis Journals, vol. 8(6), pages 591-604.
    2. José Fonseca & Martino Grasselli & Claudio Tebaldi, 2007. "Option pricing when correlations are stochastic: an analytical framework," Review of Derivatives Research, Springer, vol. 10(2), pages 151-180, May.
    3. Martino Grasselli & Claudio Tebaldi, 2008. "Solvable Affine Term Structure Models," Mathematical Finance, Wiley Blackwell, vol. 18(1), pages 135-153, January.
    4. Gourieroux, C. & Monfort, A. & Sufana, R., 2010. "International money and stock market contingent claims," Journal of International Money and Finance, Elsevier, vol. 29(8), pages 1727-1751, December.
    5. Bru, Marie-France, 1989. "Diffusions of perturbed principal component analysis," Journal of Multivariate Analysis, Elsevier, vol. 29(1), pages 127-136, April.
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