Lévy Processes

TL;DR for operators Jaehyung Choi’s paper does not offer a new trading strategy, volatility forecast, or backtest that makes the Sharpe ratio stand up and sing.1 Its contribution is more structural: it builds an information-geometric framework for Lévy processes, the family of stochastic processes often used when financial returns refuse to behave like polite Gaussian increments. ...

TL;DR for operators Discounting is the quiet plumbing of derivatives. Most option-pricing systems assume a risk-free asset sits somewhere in the background, calmly providing the rate at which future payoffs become present prices. This paper asks what happens when that safe haven is unavailable, unreliable, or merely too theoretical to be useful. Its answer is not to abandon discounting, but to manufacture it from the relative dynamics of two risky assets.1 ...