Browsing by Author "Çağlar, M."

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Open Access
Hedging portfolio for a market model of degenerate diffusions
(Taylor & Francis, 2022-11-30) Çağlar, M.; Demirel, İ.; Üstünel, Süleyman
We consider a semimartingale market model when the underlying diffusion has a singular volatility matrix and compute the hedging portfolio for a given payoff function. Recently, the representation problem for such degenerate diffusions as a stochastic integral with respect to a martingale has been completely settled. This representation and Malliavin calculus established further for the functionals of a degenerate diffusion process constitute the basis of the present work. Using the Clark–Hausmann–Bismut–Ocone type representation formula derived for these functionals, we prove a version of this formula under an equivalent martingale measure. This allows us to derive the hedging portfolio as a solution of a system of linear equations. The uniqueness of the solution is achieved by a projection idea that lies at the core of the martingale representation at the first place. We demonstrate the hedging strategy as explicitly as possible with some examples of the payoff function such as those used in exotic options, whose value at maturity depends on the prices over the entire time horizon.
Open Access
On the modeling of CO2 EUA and CER prices of EU-ETS for the 2008–2012 period
(John Wiley and Sons, 2016) Gürler, Ü.; Yenigün, D.; Çağlar, M.; Berk, E.
Increased consumption of fossil fuels in industrial production has led to a significant elevation in the emission of greenhouse gases and to global warming. The most effective international action against global warming is the Kyoto Protocol, which aims to reduce carbon emissions to desired levels in a certain time span. Carbon trading is one of the mechanisms used to achieve the desired reductions. One of the most important implications of carbon trading for industrial systems is the risk of uncertainty about the prices of carbon allowance permits traded in the carbon markets. In this paper, we consider stochastic and time series modeling of carbon market prices and provide estimates of the model parameters involved, based on the European Union emissions trading scheme carbon allowances data obtained for 2008–2012 period. In particular, we consider fractional Brownian motion and autoregressive moving average–generalized autoregressive conditional heteroskedastic modeling of the European Union emissions trading scheme data and provide comparisons with benchmark models. Our analysis reveals evidence for structural changes in the underlying models in the span of the years 2008–2012. Data-driven methods for identifying possible change-points in the underlying models are employed, and a detailed analysis is provided. Our analysis indicated change-points in the European Union Allowance (EUA) prices in the first half of 2009 and in the second half of 2011, whereas in the Certified Emissions Reduction (CER) prices three change-points have appeared, in the first half of 2009, the middle of 2011, and in the second half of 2012. These change-points seem to parallel the global economic indicators as well.
Open Access
Residual lifetime distribution and its applications
(Pergamon Press, 1994) Siddiqui, M. M.; Çağlar, M.
Let T be a continuous positive random variable representing the lifetime of an entity. This entity could be a human being, an animal or a plant, or a component of a mechanical or electrical system. For nonliving objects the lifetime is defined as the total amount of time for which the entity carries out its function satisfactorily. The concept of aging involves the adverse effects of age such as increased probability of failure due to wear. In this paper, we consider certain characteristics of the residual lifetime distribution at age t, such as the mean, median, and variance, as describing aging. Gamma and Weibull families of distributions are studied from this point of view. Explicit asymptotic expressions for the mean, variance and the percentiles of corresponding residual lifetime distributions are found. Finally these families of distributions are fitted to four sets of actual data, two of which are entirely new. The results can be used in discriminating different shape parameters.