Related papers: Consistent Long-Term Yield Curve Prediction
This paper is concerned with the selection and estimation of fixed and random effects in linear mixed effects models. We propose a class of nonconcave penalized profile likelihood methods for selecting and estimating important fixed…
Communication is now a standard tool in the central bank's monetary policy toolkit. Theoretically, communication provides the central bank an opportunity to guide public expectations, and it has been shown empirically that central bank…
In this paper the zero vanna implied volatility approximation for the price of freshly minted volatility swaps is generalised to seasoned volatility swaps. We also derive how volatility swaps can be hedged using a strip of vanilla options…
This paper gives examples of explicit arbitrage-free term structure models with L\'evy jumps via state price density approach. By generalizing quadratic Gaussian models, it is found that the probability density function of a L\'evy process…
Statistical arbitrage is a prevalent trading strategy which takes advantage of mean reverse property of spread of paired stocks. Studies on this strategy often rely heavily on model assumption. In this study, we introduce an innovative…
We consider a dynamic market model where buyers and sellers submit limit orders. If at a given moment in time, the buyer is unable to complete his entire order due to the shortage of sell orders at the required limit price, the unmatched…
Cross-validation is a popular non-parametric method for evaluating the accuracy of a predictive rule. The usefulness of cross-validation depends on the task we want to employ it for. In this note, I discuss a simple non-parametric setting,…
This paper considers a mortgage contract where the borrower pays a fixed mortgage rate and has the choice of making prepayment. Assume the market interest follows the CIR model, a free boundary problem is formulated. Here we focus on the…
Conjoint experiments randomize multidimensional profiles, offering a powerful design for recovering structural preference parameters -- including marginal rates of substitution, willingness to pay, and the distribution of preferences across…
We propose a methodology to analyze data arising from a curve that, over its domain, switches among J states. We consider a sequence of response variables, where each response y depends on a covariate x according to an unobserved state z.…
This paper proposes a semiparametric stochastic volatility (SV) model that relaxes the restrictive Gaussian assumption in both the return and volatility error terms, allowing them to follow flexible, nonparametric distributions with…
The Constant Elasticity of Variance (CEV) model is mathematically presented and then used in a Credit-Equity hybrid framework. Next, we propose extensions to the CEV model with default: firstly by adding a stochastic volatility diffusion…
In this paper we demonstrate both theoretically as well as numerically that neural networks can detect model-free static arbitrage opportunities whenever the market admits some. Due to the use of neural networks, our method can be applied…
We generalize classical results on the existence of optimal portfolios in discrete time frictionless market models to models with capital gains taxes. We consider the realistic but mathematically challenging rule that losses do not trigger…
We introduce an equilibrium asset pricing model, which we build on the relationship between a novel risk measure, the Expected Downside Risk (EDR) and the expected return. On the one hand, our proposed risk measure uses a nonparametric…
Distinguishing causal connections from correlations is important in many scenarios. However, the presence of unobserved variables, such as the latent confounder, can introduce bias in conditional independence testing commonly employed in…
The hypothesis that committed revolving credit lines with fixed spreads can provide firms with interest rate insurance is a standard feature of models on these credit facilities' interest rate structure. Nevertheless, this hypothesis has…
We present a simple model-free control algorithm that is able to robustly learn and stabilize an unknown discrete-time linear system with full control and state feedback subject to arbitrary bounded disturbance and noise sequences. The…
We provide a unified framework for modeling LIBOR rates using general semimartingales as driving processes and generic functional forms to describe the evolution of the dynamics. We derive sufficient conditions for the model to be…
We propose a semi-structured discrete-time multi-state model to analyse mortgage delinquency transitions. This model combines an easy-to-understand structured additive predictor, which includes linear effects and smooth functions of time…