Related papers: Modelling interest rates by correlated multi-facto…

We construct models for the pricing and risk management of inflation-linked derivatives. The models are rational in the sense that linear payoffs written on the consumer price index have prices that are rational functions of the state…

While the original Ait-Sahalia interest rate model has been found considerable use as a model for describing time series evolution of interest rates, it may not possess adequate specifications to explain responses of interest rates to…

The class of affine LIBOR models is appealing since it satisfies three central requirements of interest rate modeling. It is arbitrage-free, interest rates are nonnegative and caplet and swaption prices can be calculated analytically. In…

We address the so-called calibration problem which consists of fitting in a tractable way a given model to a specified term structure like, e.g., yield or default probability curves. Time-homogeneous jump-diffusions like Vasicek or…

The current research on credit risk is primarily focused on modeling default probabilities. Recovery rates are often treated as an afterthought; they are modeled independently, in many cases they are even assumed constant. This is despite…

We study an extension of the Cox-Ingersoll-Ross (CIR) process that incorporates jumps at deterministic dates, referred to as stochastic discontinuities. Our main motivation stems from short-rate modelling in the context of overnight rates,…

The notion of a credit spread curve is fundamental in fixed income investing, but in practice it is not `given' and needs to be constructed from bond prices either for a particular issuer, or for a sector rating-by-rating. Rather than…

Markov switching models are often used to analyze financial returns because of their ability to capture frequently observed stylized facts. In this paper we consider a multivariate Student-t version of the model as a viable alternative to…

A general structural equation model is fitted on a panel data set that consists of $I$ correlated samples. The correlated samples could be data from correlated populations or correlated observations from occasions of panel data. We consider…

In this survey paper we discuss recent advances on short interest rate models which can be formulated in terms of a stochastic differential equation for the instantaneous interest rate (also called short rate) or a system of such equations…

The stability of the inflation rate is a necessary condition for the proper functioning of any capitalist economy. In an economic environment with volatile inflation, the growth of the economy and its distribution among the agents of…

The subject of the present article is the study of correlations between large insurance companies and their contribution to systemic risk in the insurance sector. Our main goal is to analyze the conditional structure of the correlation on…

In complex systems, crucial parameters are often subject to unpredictable changes in time. Climate, biological evolution and networks provide numerous examples for such non-stationarities. In many cases, improved statistical models are…

Using a data set which includes all transactions among banks in the Italian money market, we study their trading strategies and the dependence among them. We use the Fourier method to compute the variance-covariance matrix of trading…

This paper considers the case of pricing discretely-sampled variance swaps under the class of equity-interest rate hybridization. Our modeling framework consists of the equity which follows the dynamics of the Heston stochastic volatility…

Given the importance of continuous-time stochastic volatility models to describe the dynamics of interest rates, we propose a goodness-of-fit test for the parametric form of the drift and diffusion functions, based on a marked empirical…

We study factor models augmented by observed covariates that have explanatory powers on the unknown factors. In financial factor models, the unknown factors can be reasonably well explained by a few observable proxies, such as the…

Multistate models offer a powerful framework for studying disease processes and can be used to formulate intensity-based and more descriptive marginal regression models. They also represent a natural foundation for the construction of joint…

With negative growth in real production in many countries and debt levels which become an increasing burden on developed societies, the calls for a change in economic policy and even the monetary system become louder and increasingly…

We analyze correlation structures in financial markets by coarse graining the Pearson correlation matrices according to market sectors to obtain Guhr matrices using Guhr's correlation method according to Ref. [P. Rinn {\it et. al.},…