arXiv subjects

Frederi Viens

Publications and source records attributed to Frederi Viens.

At least 19 recordsLinked to original sources

arXiv2026

Surface-Driven Stochastic Volatility for Commodity Options: Identification of Stochastic Vol-of-Vol and Leverage from Smile Dynamics

Commodity option surfaces contain information beyond the at-the-money volatility level. We develop a surface-driven stochastic-volatility framework for soybean futures options using daily Chicago Mercantile Exchange Group Volatility Index (CME CVOL) indicators from October 2013 to August 2025. The ATM level and convexity are positive, right-skewed, and well described by log Ornstein Uhlenbeck dynamics, whereas the additive skew changes sign and is modeled on the real line by an Ornstein Uhlenbeck process. These empirical features motivate a joint mean-reverting surface-factor system. Under a log OU futures volatility model, leading-order smile relations map the ATM level to the latent volatility state, convexity to an effective surface-implied volatility- of-volatility state, and skew to an effective leverage state. We derive the associated risk-neutral pricing equation and Feynman Kac representation, benchmark prices by Monte Carlo simulation, validate the pricing PDE by finite differences, and train a neural-network surrogate for fast repeated valuation. The empirical results show substantial variation in surface states across market regimes, with the 2021 La Nina drought window exhibiting elevated volatility and skewness. The numerical results show close agreement between finite-difference and Monte Carlo prices over the validation grid, while the neural-network surrogate reproduces the pricing map at substantially lower inference cost. Overall, the results support the use of level, skew, and convexity jointly as dynamic inputs for commodity-option pricing and model diagnostics.

q-fin.MF↗

arXiv2026

Beyond Lognormal Sums: A Four-Moment Probability Framework for Basket and Spread Option Pricing

Basket options are difficult to value under correlated lognormal dynamics because weighted sums and differences of lognormal variables have no tractable distribution. This paper develops a probability-based four-moment framework that separates the exact pricing representation from the distributional approximation. A change of measure first writes a basket price as a linear combination of probabilities. For a standard basket with one positive weight, these probabilities become CDF values of positive correlated lognormal sums. Each sum is approximated by a shifted lognormal variance mixture matched to its first four moments. For an unrestricted mixed-sign basket, a signed shifted lognormal proxy gives an analytical call-price formula. We state admissibility conditions, provide a practical root-selection rule, establish the main strike-based financial properties of the direct proxy, and derive exact pricing-error identities in terms of cumulative distribution function (CDF) discrepancies. The numerical analysis combines standard-basket benchmarks with an empirical application to a normalized $3{:}2{:}1$ crack spread constructed from RBOB gasoline, ULSD or heating oil, and WTI futures. The results show that the probability reformulation and the fourth-moment condition improve the distributional fit and pricing accuracy, particularly when maturity and tail asymmetry increase. The framework remains analytical, transparent, and suitable for repeated valuation across strikes and maturities.

q-fin.PR↗

arXiv2025

Asymptotics of Yule's nonsense correlation for Ornstein-Uhlenbeck paths: The correlated case

We study the continuous-time version of the empirical correlation coefficient between the paths of two possibly correlated Ornstein-Uhlenbeck processes, known as Yule's nonsense correlation for these paths. Using sharp tools from the analysis on Wiener chaos, we establish the asymptotic normality of the fluctuations of this correlation coefficient around its long-time limit, which is the mathematical correlation coefficient between the two processes. This asymptotic normality is quantified in Kolmogorov distance, which allows us to establish speeds of convergence in the Type-II error for two simple tests of independence of the paths, based on the empirical correlation, and based on its numerator. An application to independence of two observations of solutions to the stochastic heat equation is given, with excellent asymptotic power properties using merely a small number of the solutions' Fourier modes.

math.PR↗

arXiv2023

The isometry of symmetric-Stratonovich integrals w.r.t. Fractional Brownian motion $H< \frac{1}{2}$

In this work, we present a detailed analysis on the exact expression of the $L^2$-norm of the symmetric-Stratonovich stochastic integral driven by a multi-dimensional fractional Brownian motion $B$ with parameter $\frac{1}{4} < H < \frac{1}{2}$. Our main result is a complete description of a Hilbert space of integrand processes which realizes the $L^2$-isometry where none regularity condition in the sense of Malliavin calculus is imposed. The main idea is to exploit the regularity of the conditional expectation of the tensor product of the increments $B_{t-δ,t+δ}\otimes B_{s-ε,s+ε}$ onto the Gaussian space generated by $(B_s,B_t)$ as $(δ,ε)\downarrow 0$. The Hilbert space is characterized in terms of a random Radon $σ$-finite measure on $[0,T]^2$ off diagonal which can be characterized as a product of a non-Markovian version of the stochastic Nelson derivatives. As a by-product, we present the exact explicit expression of the $L^2$-norm of the pathwise rough integral in the sense of Gubinelli.

math.PR↗

arXiv2023

Irregularity scales for Gaussian processes: Hausdorff dimensions and hitting probabilities

Let $X$ be a $d$-dimensional Gaussian process in $[0,1]$, where the component are independent copies of a scalar Gaussian process $X_0$ on $[0,1]$ with a given general variance function $γ^2(r)=\operatorname{Var}\left(X_0(r)\right)$ and a canonical metric $δ(t,s):=(\mathbb{E}\left(X_0(t)-X_0(s)\right)^2)^{1/2}$ which is commensurate with $γ(t-s)$. Under a weak regularity condition on $γ$, referred to below as $\mathbf{(C_{0+})}$, which allows $γ$ to be far from Hölder-continuous, we prove that for any Borel set $E\subset [0,1]$, the Hausdorff dimension of the image $X(E)$ and of the graph $Gr_E(X)$ are constant almost surely. Furthermore, we show that these constants can be explicitly expressed in terms of $\dim_δ(E)$ and $d$. However, when $\mathbf{(C_{0+})}$ is not satisfied, the classical methods may yield different upper and lower bounds for the underlying Hausdorff dimensions. This case is illustrated via a class of highly irregular processes known as logBm. Even in such cases, we employ a new method to establish that the Hausdorff dimensions of $X(E)$ and $Gr_E(X)$ are almost surely constant. The method uses the Karhunen-Loève expansion of $X$ to prove that these Hausdorff dimensions are measurable with respect to the expansion's tail sigma-field. Under similarly mild conditions on $γ$, we derive upper and lower bounds on the probability that the process $X$ can reach the Borel set $F$ in $\mathbb{R}^d$ from the Borel set $E$ in $[0,1]$. These bounds are obtained by considering the Hausdorff measure and the Bessel-Riesz capacity of $E\times F$ in an appropriate metric $ρ_δ$ on the product space, relative to appropriate orders. Moreover, we demonstrate that the dimension $d$ plays a critical role in determining whether $X\lvert_E$ hits $F$ or not.

math.PR↗

arXiv2023

Pricing basket options with the first three moments of the basket: log-normal models and beyond

Options on baskets (linear combinations) of assets are notoriously challenging to price using even the simplest log-normal continuous-time stochastic models for the individual assets. The paper [5] gives a closed form approximation formula for pricing basket options with potentially negative portfolio weights under log-normal models by moment matching. This approximation formula is conceptually simple, methodologically sound, and turns out to be highly accurate. However it involves solving a system of nonlinear equations which usually produces multiple solutions and which is sensitive to the selection of initial values in the numerical procedures, making the method computationally challenging. In the current paper, we take the moment-matching methodology in [5] a step further by obtaining a closed form solution for this non-linear system of equations, by identifying a unary cubic equation based solely on the basket's skewness, which parametrizes all model parameters, and we use it to express the approximation formula as an explicit function of the mean, variance, and skewness of the basket. Numerical comparisons with the baskets considered in [5] show a very high level of agreement, and thus of accuracy relative to the true basket option price.

q-fin.PR↗

arXiv2022

Bayes goes fast: Uncertainty Quantification for a Covariant Energy Density Functional emulated by the Reduced Basis Method

A covariant energy density functional is calibrated using a principled Bayesian statistical framework informed by experimental binding energies and charge radii of several magic and semi-magic nuclei. The Bayesian sampling required for the calibration is enabled by the emulation of the high-fidelity model through the implementation of a reduced basis method (RBM) - a set of dimensionality reduction techniques that can speed up demanding calculations involving partial differential equations by several orders of magnitude. The RBM emulator we build - using only 100 evaluations of the high-fidelity model - is able to accurately reproduce the model calculations in tens of milliseconds on a personal computer, an increase in speed of nearly a factor of 3,300 when compared to the original solver. Besides the analysis of the posterior distribution of parameters, we present predictions with properly estimated uncertainties for observables not included in the fit, specifically the neutron skin thickness of 208Pb and 48Ca, as reported by PREX and CREX collaborations. The straightforward implementation and outstanding performance of the RBM makes it an ideal tool for assisting the nuclear theory community in providing reliable estimates with properly quantified uncertainties of physical observables. Such uncertainty quantification tools will become essential given the expected abundance of data from the recently inaugurated and future experimental and observational facilities.

nucl-th↗

arXiv2021

Hausdorff dimensions and Hitting probabilities for some general Gaussian processes

Let $B$ be a $d$-dimensional Gaussian process on $\mathbb{R}$, where the component are independents copies of a scalar Gaussian process $B_0$ on $\mathbb{R}_+$ with a given general variance function $γ^2(r)=\operatorname{Var}\left(B_0(r)\right)$ and a canonical metric $δ(t,s):=(\mathbb{E}\left(B_0(t)-B_0(s)\right)^2)^{1/2}$ which is commensurate with $γ(t-s)$. We provide some general condition on $γ$ so that for any Borel set $E\subset [0,1]$, the Hausdorff dimension of the image $B(E)$ is constant a.s., and we explicit this constant. Also, we derive under some mild assumptions on $γ\,$ an upper and lower bounds of $\mathbb{P}\left\{B(E)\cap F\neq \emptyset \right\}$ in terms of the corresponding Hausdorff measure and capacity of $E\times F$. Some upper and lower bounds for the essential supremum norm of the Hausdorff dimension of $B(E)\cap F$ and $E\cap B^{-1}(F)$ are also given in terms of $d$ and the corresponding Hausdorff dimensions of $E\times F$, $E$, and $F$.

math.PR↗

arXiv2020

Market Making under a Weakly Consistent Limit Order Book Model

We develop a new market-making model, from the ground up, which is tailored towards high-frequency trading under a limit order book (LOB), based on the well-known classification of order types in market microstructure. Our flexible framework allows arbitrary order volume, price jump, and bid-ask spread distributions as well as the use of market orders. It also honors the consistency of price movements upon arrivals of different order types. For example, it is apparent that prices should never go down on buy market orders. In addition, it respects the price-time priority of LOB. In contrast to the approach of regular control on diffusion as in the classical Avellaneda and Stoikov [1] market-making framework, we exploit the techniques of optimal switching and impulse control on marked point processes, which have proven to be very effective in modeling the order-book features. The Hamilton-Jacobi-Bellman quasi-variational inequality (HJBQVI) associated with the control problem can be solved numerically via finite-difference method. We illustrate our optimal trading strategy with a full numerical analysis, calibrated to the order-book statistics of a popular Exchanged-Traded Fund (ETF). Our simulation shows that the profit of market-making can be severely overstated under LOBs with inconsistent price movements.

q-fin.TR↗

arXiv2020

Neutron drip line in the Ca region from Bayesian model averaging

The region of heavy calcium isotopes forms the frontier of experimental and theoretical nuclear structure research where the basic concepts of nuclear physics are put to stringent test. The recent discovery of the extremely neutron-rich nuclei around $^{60}$Ca [Tarasov, 2018] and the experimental determination of masses for $^{55-57}$Ca (Michimasa, 2018] provide unique information about the binding energy surface in this region. To assess the impact of these experimental discoveries on the nuclear landscape's extent, we use global mass models and statistical machine learning to make predictions, with quantified levels of certainty, for bound nuclides between Si and Ti. Using a Bayesian model averaging analysis based on Gaussian-process-based extrapolations we introduce the posterior probability $p_{ex}$ for each nucleus to be bound to neutron emission. We find that extrapolations for drip-line locations, at which the nuclear binding ends, are consistent across the global mass models used, in spite of significant variations between their raw predictions. In particular, considering the current experimental information and current global mass models, we predict that $^{68}$Ca has an average posterior probability ${p_{ex}\approx76}$% to be bound to two-neutron emission while the nucleus $^{61}$Ca is likely to decay by emitting a neutron (${p_{ex}\approx 46}$ %).

nucl-th↗

arXiv2019

Bayesian averaging of computer models with domain discrepancies: a nuclear physics perspective

This article studies Bayesian model averaging (BMA) in the context of competing expensive computer models in a typical nuclear physics setup. While it is well known that BMA accounts for the additional uncertainty of the model itself, we show that it also decreases the posterior variance of the prediction errors via an explicit decomposition. We extend BMA to the situation where the competing models are defined on non-identical study regions. Any model's local forecasting difficulty is offset by predictions obtained from the average model, thus extending individual models to the full domain. We illustrate our methodology via pedagogical simulations and applications to forecasting nuclear observables, which exhibit convincing improvements in both the BMA prediction error and empirical coverage probabilities.

stat.ME↗

arXiv2018

A Martingale Approach for Fractional Brownian Motions and Related Path Dependent PDEs

In this paper we study dynamic backward problems, with the computation of conditional expectations as a main objective, in a framework where the (forward) state process satisfies a Volterra type SDE, with fractional Brownian motion as a typical example. Such processes are neither Markov processes nor semimartingales, and most notably, they feature a certain time inconsistency which makes any direct application of Markovian ideas, such as flow properties, impossible without passing to a path-dependent framework. Our main result is a functional Itô formula, extending the seminal work of Dupire \cite{Dupire} to our more general framework. In particular, unlike in \cite{Dupire} where one needs only to consider the stopped paths, here we need to concatenate the observed path up to the current time with a certain smooth observable curve derived from the distribution of the future paths. This new feature is due to the time inconsistency involved in this paper. We then derive the path dependent PDEs for the backward problems. Finally, an application to option pricing in a financial market with rough volatility is presented.

math.PR↗

arXiv2018

Bayesian approach to model-based extrapolation of nuclear observables

The mass, or binding energy, is the basis property of the atomic nucleus. It determines its stability, and reaction and decay rates. Quantifying the nuclear binding is important for understanding the origin of elements in the universe. The astrophysical processes responsible for the nucleosynthesis in stars often take place far from the valley of stability, where experimental masses are not known. In such cases, missing nuclear information must be provided by theoretical predictions using extreme extrapolations. Bayesian machine learning techniques can be applied to improve predictions by taking full advantage of the information contained in the deviations between experimental and calculated masses. We consider 10 global models based on nuclear Density Functional Theory as well as two more phenomenological mass models. The emulators of S2n residuals and credibility intervals defining theoretical error bars are constructed using Bayesian Gaussian processes and Bayesian neural networks. We consider a large training dataset pertaining to nuclei whose masses were measured before 2003. For the testing datasets, we considered those exotic nuclei whose masses have been determined after 2003. We then carried out extrapolations towards the 2n dripline. While both Gaussian processes and Bayesian neural networks reduce the rms deviation from experiment significantly, GP offers a better and much more stable performance. The increase in the predictive power is quite astonishing: the resulting rms deviations from experiment on the testing dataset are similar to those of more phenomenological models. The empirical coverage probability curves we obtain match very well the reference values which is highly desirable to ensure honesty of uncertainty quantification, and the estimated credibility intervals on predictions make it possible to evaluate predictive power of individual models.

nucl-th↗

arXiv2017

Extreme-Strike Asymptotics for General Gaussian Stochastic Volatility Models

We consider a stochastic volatility asset price model in which the volatility is the absolute value of a continuous Gaussian process with arbitrary prescribed mean and covariance. By exhibiting a Karhunen-Loève expansion for the integrated variance, and using sharp estimates of the density of a general second-chaos variable, we derive asymptotics for the asset price density for large or small values of the variable, and study the wing behavior of the implied volatility in these models. Our main result provides explicit expressions for the first five terms in the expansion of the implied volatility. The expressions for the leading three terms are simple, and based on three basic spectral-type statistics of the Gaussian process: the top eigenvalue of its covariance operator, the multiplicity of this eigenvalue, and the $L^{2}$ norm of the projection of the mean function on the top eigenspace. The fourth term requires knowledge of all eigen-elements. We present detailed numerics based on realistic liquidity assumptions in which classical and long-memory volatility models are calibrated based on our expansion.

q-fin.MF↗

arXiv2016

Small-time asymptotics for Gaussian self-similar stochastic volatility models

We consider the class of self-similar Gaussian stochastic volatility models, and compute the small-time (near-maturity) asymptotics for the corresponding asset price density, the call and put pricing functions, and the implied volatilities. Unlike the well-known model-free behavior for extreme-strike asymptotics, small-time behaviors of the above depend heavily on the model, and require a control of the asset price density which is uniform with respect to the asset price variable, in order to translate into results for call prices and implied volatilities. Away from the money, we express the asymptotics explicitly using the volatility process' self-similarity parameter $H$, its first Karhunen-Loeve eigenvalue at time 1, and the latter's multiplicity. Several model-free estimators for $H$ result. At the money, a separate study is required: the asymptotics for small time depend instead on the integrated variance's moments of orders 1/2 and 3/2, and the estimator for $H$ sees an affine adjustment, while remaining model-free.

q-fin.MF↗

arXiv2016

Optimal rates for parameter estimation of stationary Gaussian processes

We study rates of convergence in central limit theorems for partial sum of functionals of general stationary and non-stationary Gaussian sequences, using optimal tools from analysis on Wiener space. We apply our result to study drift parameter estimation problems for some stochastic differential equations driven by fractional Brownian motion with fixed-time-step observations.

math.ST↗

arXiv2016

A third-moment theorem and precise asymptotics for variations of stationary Gaussian sequences

In two new papers (Bierme et al., 2013) and (Nourdin and Peccati, 2015), sharp general quantitative bounds \ are given to complement the well-known fourth moment theorem of Nualart and Peccati, by which a sequence in a fixed Wiener chaos converges to a normal law if and only if its fourth cumulant converges to $0$. The bounds show that the speed of convergence is precisely of order the maximum of the fourth cumulant and the absolute value of the third moment (cumulant). Specializing to the case of normalized centered quadratic variations for stationary Gaussian sequences, we show that a third moment theorem holds: convergence occurs if and only if the sequence's third moments tend to $0$. This is proved for sequences with general decreasing covariance, by using the result of (Nourdin and Peccati, 2015), and finding the exact speed of convergence to $0$ of the quadratic variation's third and fourth cumulants. (Nourdin and Peccati, 2015) also allows us to derive quantitative estimates for the speeds of convergence in a class of log-modulated covariance structures, which puts in perspective the notion of critical Hurst parameter when studying the convergence of fractional Brownian motion's quadratic variation. We also study the speed of convergence when the limit is not Gaussian but rather a second-Wiener-chaos law. Using a log-modulated class of spectral densities, we recover a classical result of Dobrushin-Major/Taqqu whereby the limit is a Rosenblatt law, and we provide new convergence speeds. The conclusion in this case is that the price to pay to obtain a Rosenblatt limit despite a slowly varying modulation is a very slow convergence speed, roughly of the same order as the modulation.

math.PR↗

arXiv2014

Gaussian and non-Gaussian processes of zero power variation, and related stochastic calculus

We consider a class of stochastic processes $X$ defined by $X\left( t\right) =\int_{0}^{T}G\left( t,s\right) dM\left( s\right) $ for $t\in\lbrack0,T]$, where $M$ is a square-integrable continuous martingale and $G$ is a deterministic kernel. Let $m$ be an odd integer. Under the assumption that the quadratic variation $\left[ M\right] $ of $M$ is differentiable with $\mathbf{E}\left[ \left\vert d\left[ M\right] (t)/dt\right\vert ^{m}\right] $ finite, it is shown that the $m$th power variation $$ \lim_{\varepsilon\rightarrow0}\varepsilon^{-1}\int_{0}^{T}ds\left( X\left( s+\varepsilon\right) -X\left( s\right) \right) ^{m} $$ exists and is zero when a quantity $δ^{2}\left( r\right) $ related to the variance of an increment of $M$ over a small interval of length $r$ satisfies $δ\left( r\right) =o\left( r^{1/(2m)}\right) $. When $M$ is the Wiener process, $X$ is Gaussian; the class then includes fractional Brownian motion and other Gaussian processes with or without stationary increments. When $X$ is Gaussian and has stationary increments, $δ$ is $X$'s univariate canonical metric, and the condition on $δ$ is proved to be necessary. In the non-stationary Gaussian case, when $m=3$, the symmetric (generalized Stratonovich) integral is defined, proved to exist, and its Itô formula is established for all functions of class $C^{6}$.

math.PR↗