Related papers: Interest-Rate Modeling with Multiple Yield Curves
We explore credit risk pricing by modeling equity as a call option and debt as the difference between the firm's asset value and a put option, following the structural framework of the Merton model. Our approach proceeds in two stages:…
Non-stationary extremal dependence, whereby the relationship between the extremes of multiple variables evolves over time, is commonly observed in many environmental and financial data sets. However, most multivariate extreme value models…
We present an arbitrage-free non-parametric yield curve prediction model which takes the full (discretized) yield curve as state variable. We believe that absence of arbitrage is an important model feature in case of highly correlated data,…
We introduce a new framework for optimal routing and arbitrage in AMM driven markets. This framework improves on the original best-practice convex optimization by restricting the search to the boundary of the optimal space. We can…
Crop yield prediction typically involves the utilization of either theory-driven process-based crop growth models, which have proven to be difficult to calibrate for local conditions, or data-driven machine learning methods, which are known…
This paper proposes a market consistent valuation framework for variable annuities with guaranteed minimum accumulation benefit, death benefit and surrender benefit features. The setup is based on a hybrid model for the financial market and…
A novel approach to price indices, leading to an innovative solution in both a multi-period or a multilateral framework, is presented. The index turns out to be the generalized least squares solution of a regression model linking values and…
Several studies have established the predictive power of the yield curve in terms of real economic activity. In this paper we use data for a variety of E.U. countries: both EMU (Germany, France, Italy) and non-EMU members (Sweden and the…
Pricing of high-dimensional options is a deep problem of the Theoretical Financial Mathematics. In this article we present a new class of L\'{e}vy driven models of stock markets. In our opinion, any market model should be based on a…
Financial markets tend to switch between various market regimes over time, making stationarity-based models unsustainable. We construct a regime-switching model independent of asset classes for risk-adjusted return predictions based on…
An accurate prediction of crude oil prices over long future horizons is challenging and of great interest to governments, enterprises, and investors. This paper proposes a revised hybrid model built upon empirical mode decomposition (EMD)…
Predicting the price that has the least error and can provide the best and highest accuracy has been one of the most challenging issues and one of the most critical concerns among capital market activists and researchers. Therefore, a model…
We provide a general and flexible approach to LIBOR modeling based on the class of affine factor processes. Our approach respects the basic economic requirement that LIBOR rates are non-negative, and the basic requirement from mathematical…
In financial markets, the information that traders have about an asset is reflected in its price. The arrival of new information then leads to price changes. The `information-based framework' of Brody, Hughston and Macrina (BHM) isolates…
In this paper we show how to approximate a Heath-Jarrow-Morton dynamics for the forward prices in commodity markets with arbitrage-free models which have a finite dimensional state space. Moreover, we recover a closed form representation of…
We present a path integral method to derive closed-form solutions for option prices in a stochastic volatility model. The method is explained in detail for the pricing of a plain vanilla option. The flexibility of our approach is…
Recent studies have identified long-range dependence as a key feature in the dynamics of both mortality and interest rates. Building on this insight, we develop a novel bi-variate stochastic framework based on mixed fractional Brownian…
The study of variability in software development has become increasingly important in recent years. A common mechanism to represent the variability in a product line is by means of feature models. However, the relationship between these…
We present an interactive probing tool to create, modify and analyze what-if scenarios for multivariate time series models. The solution is applied to freight trading, where analysts can carry out sensitivity analysis on freight rates by…
Valuation adjustments are nowadays a common practice to include credit and liquidity effects in option pricing. Funding costs arising from collateral procedures, hedging strategies and taxes are added to option prices to take into account…