This program seeks to develop new and improved models of financial market and asset price dynamics in continuous and discrete time, and establish a theoretically consistent framework with a new market microstructure dynamics.

The program comprises three sub-strands in:

Modelling Asset Prices in Continuous and Discrete Time

This project will derive a new class of multi-factor continuous and discrete time stochastic asset price models that is consistent with the stylised facts for stocks, currencies and interest rates. The link between continuous and discrete time formulations will be clarified, and stochastic volatility effects will be examined.

Modelling Financial Market Dynamics

This project will construct a theoretical framework for financial market dynamics. Axiomatic principles will be invoked, and heterogeneous as well as imperfectly rational expectations will be explored.

Pricing and Hedging in Incomplete Markets

This project will establish a consistent theory of local risk minimal and mean variance pricing and hedging in incomplete markets. Quantitative tools will be developed to incorporate the effect of incomplete markets into the asset pricing framework.

For further information, contact Professor Eckhard Platen or Professor Alex Novikov