Stochastic Systems Research Group

The Stochastic Systems Research Group has been established in January 1st 1998. The creation of the group was justified by the increasing interest in stochastic models in important areas such as financial mathematics, non-linear dynamical systems and optimization. The main objective is to promote cross-fertilization of these and other more established areas.

Description

The Research Activity

A main area of research of the Stochastic Systems Research Group is the analysis of options on discrete-time financial markets. Arbitrage theory of models including transaction costs has been studied. An emerging area is utility-based pricing in non-complete markets and large financial markets. Two recent research areas are the modelling the behaviour of market players, using ideas of co-operative control and the maximization of growth-rate of wealth-processes for currency-portfolios.

A highly flexible tool for modelling non-linear dynamics is Hidden Markov Models (HMM), widely used in communication, control and finance. The group is active in developing computationally feasible statistical procedures/methods for the statistical analysis of Hidden Markov Models. The analysis of widely accepted stochastic volatility models is a focal point of current research.

The group has been established in 1998 and has been staffed with four freshman over the years. Members of the group either have or are about to earn their PhD degrees at various institutes (The University of Franche-Comte,Besancon, France, the Eötvös Loránd University, Budapest and the Technical University of Budapest).

Active insititutional partners:

National:

Eötvös Lóránd University
Department of Probability Theory and Statistics

Alfréd Rényi Mathematical Institute of the
Hungarian Academy of Sciences
Department of Statistics.

International:

CNR, LADSEB, Padova
CWI, Amsterdam,
IBM Research, San Jose
IRISA/INRIA, Rennes
The Johns Hopkins University, APL, Baltimore, MD