Marco Avellaneda: Papers on Financial Modeling

The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed, the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back.
J. M. Keynes (1883-1946)

High-frequency trading in a Limit Order Book(April 2008, co-author: Sasha Stoikov )

Statistical Arbitrage in the U.S. Equities Market(July 2008, co-author: Jeong-Hyun Lee ) [PDF]

From SABR to Geodesics(November 2005 )

Hedge Funds: How big is big?(Working paper, August 2005, coauthor: Paul Besson)

Trading volatility(Presentation Slides, Nov 2004)
[PDF][SwissHedge Magazine]

A look ahead at option pricing and volatility
(Quantitative Finance, December 2004)
[PDF ]

A market-induced mechanism for stock pinning
(co-author: Michael Lipkin, March 2003, Quantitiative Finance, Dec 2003)
[ abstract ][PDF ][Slides ]

On parabolic equations with gauge function term and applications to the multidimensional Leland equation
(co-author: Joerg Kampen, to appear in Applied Mathematical Finance , April 2003)
[ abstract ][PDF ]

Pricing and Hedging Derivative Securities in Markets with UncertainVolatility: A ``Case-Study'' on the Trinomial Tree
(co-authors: Arnon Levy, Antonio Paras, unpublished manuscript, 1994)
[ abstract ][PDF ]

Empirical Aspects of Dispersion Trading in U.S. Equity Markets
(Slides from Presentation at Le Petit Dejeuner de la Finance, Paris, November 2002)
[ abstract ][PDF ]

Weighted Monte Carlo Methods for Multi-Asset Equity Derivatives: Theory and Practice
(Slides from Presentation at the Workhshop on Multi-Asset Options, Paris, November 2002)
[ abstract ][PDF ]

Distancia al incumplimento
(co-author: Jingyi Zhu, Spanish RISK 2002)
[ abstract ][PDF ]

Reconstruction of Volatility: Pricing index options using the steepest-descent approximation (co-authors: Dash Boyer-Olson, Jerome Busca, Peter Friz, RISK October 2002)
[ abstract ][PDF ][ RISK version][ Slides ]

An E-ARCH model for the Term Structure of Implied Volatility of FX options
(co-author: Yingzi Zhu, published in Applied Mathematical Finance , 1998)
[ abstract ][PDF ]

Minimum-Entropy Calibration of Asset-Pricing Models
(published in IJTAF, 1999)
[abstract ][PDF ]

Modeling the distance-to-default process of a firm
(co-author: Jingyi Zhu, October 2001, RISK Dec. 2001 )
[ abstract ][PDF [ RISK version ]

Pricing and hedging derivative securities in markets with uncertain volatilities
(co-authors: Arnon Levy, Antonio Paras, published in Applied Mathematical Finance,1995)
[abstract ][PDF ]

Following the Bayes' approach to option pricing
(co-authors: Andrea Carelli, Fabio Stella, published in Journal of Computational Finance, 2000)
[abstract ][PDF ]

Conquering the Greeks in Monte Carlo
(co-author: Roberta Gamba, published in Proceedings of the First Bachelier Congress, 2001, Proc. Courant Seminar Vol. III, 2001)
[abstract ][PDF ]

Credit Contagion: Pricing Cross Country Risk in Brady Debt Markets
(co-author: Lixin Wu, published in IJTAF, 2001)
[abstract ][ PDF ]

Variance Swap Volatility and Option Strategies
(published in Derivatives Week, Nov 2000)
[abstract ][PDF ]

Dynamic Hedging with Transaction Costs: from Lattice Models to Nonlinear Volatility and Free-Boundary Problems
(co-author: Antonio Paras, unpublished manuscript, 1994)
[abstract ][PDF ]

Weighted Monte Carlo: A new Technique for Calibrating Asset-Pricing Models
(co-authors: Robert Buff,  Craig Friedman, Nicolas Grandchamp, Lukasz Kruk, Joshua Newman, published in: IJTAF 2000, Proc. Courant Seminar Vol II, 2000)
[abstract ][PDF ]

A Risk-Neutral Stochastic Volatility Model
(co-author: Yingzi Zhu, published in Applied Mathematical Finance , 1997)
[abstract ][PDF ]

Calibrating Volatility Surfaces via Relative Entropy Minimization
(co-authors: Craig Friedman, Richard Holmes, Dominick Samperi, published in: IJTAF, 1998, Proc. Courant Seminar, Vol I, 1999) 
[abstract ][PDF ]

Pricing Interest Rate Contingent Claims in Markets with Uncertain Volatility
(co-author: Pawel Lewicki, unpublished manuscript, 1995)
[abstract ][PDF ]

Pricing Parisian-style Options with a Lattice Method
(co-author: Lixin Wu, published in: IJTAF, 1999)
[abstract ][PDF ]

Managing the Volatility Risk of Portfolios of  Derivative Securities: the Lagrangian Uncertain Volatility Model
(co-author: Antonio Paras, published in Applied Mathematical Finance , 1996)
[abstract ][PDF ]

All for One and One for All: a Principal Components Analysis of the Latin American Brady Bond Market from 1994 to 2000
(co-author: Kevin Scherer, to appear in IJTAF, 2002)
[abstract ][PDF ]

An Introduction to Option Pricing and the Mathematical Theory of Risk
(published in Proc. Workshop AMS Winter Meeting, 1997)
[abstract ][PDF ]

Dynamic Hedging Portfolios for Derivative Securities in the Presence of Large Transaction Costs
(co-author: Antonio Paras, published in Applied Mathematical Finance , 1994)
[abstract ][PDF ]

Combinatorial Implications of Nonlinear Uncertain Volatility Scenarios: the Case of Barrier Options
(co-author: Robert Buff, published in Applied Mathematical Finance , 1998)

Positive Interest Rates and Non-Linear Term Structure Models
(co-author: Joshua Newman, unpublished manuscript, 1998)