Related papers: A flexible matrix Libor model with smiles

We propose a non-parametric extension with leverage functions to the Andersen commodity curve model. We calibrate this model to market data for WTI and NG including option skew at the standard maturities. While the model can be calibrated…

Our article considers a regression model with observed factors. The observed factors have a flexible stochastic volatility structure that has separate dynamics for the volatilities and the correlation matrix. The correlation matrix of the…

We formulate a forward inflation index model with multi-factor volatility structure featuring a parametric form that allows calibration to correlations between indices of different tenors observed in the market. Assuming the nominal…

Volatility Skew and Smile of Interest Rate products (Swaption and Caplet) are represented by SABR (Stochastic Alpha Beta Rho model). So, the Interest Rate derivatives model for pricing the callable exotic swaps should be comparable to the…

This paper develops a flexible and computationally efficient multivariate volatility model, which allows for dynamic conditional correlations and volatility spillover effects among financial assets. The new model has desirable properties…

We prove a large deviations principle for the class of multidimensional affine stochastic volatility models considered in (Gourieroux, C. and Sufana, R., J. Bus. Econ. Stat., 28(3), 2010), where the volatility matrix is modelled by a…

We introduce a flexible method to simultaneously infer both the drift and volatility functions of a discretely observed scalar diffusion. We introduce spline bases to represent these functions and develop a Markov chain Monte Carlo…

In this paper we develop a framework for discretely compounding interest rates which is based on the forward price process approach. This approach has a number of advantages, in particular in the current market environment. Compared to the…

We propose a flexible class of models based on scale mixture of uniform distributions to construct shrinkage priors for covariance matrix estimation. This new class of priors enjoys a number of advantages over the traditional scale mixture…

The aim of this work is to provide fast and accurate approximation schemes for the Monte Carlo pricing of derivatives in LIBOR market models. Standard methods can be applied to solve the stochastic differential equations of the successive…

A Bayesian procedure is developed for multivariate stochastic volatility, using state space models. An autoregressive model for the log-returns is employed. We generalize the inverted Wishart distribution to allow for different correlation…

In this article, we review the construction and properties of some popular approaches to modeling LIBOR rates. We discuss the following frameworks: classical LIBOR market models, forward price models and Markov-functional models. We close…

We introduce closed-form transition density expansions for multivariate affine jump-diffusion processes. The expansions rely on a general approximation theory which we develop in weighted Hilbert spaces for random variables which possess…

The aim of this work is to provide fast and accurate approximation schemes for the Monte-Carlo pricing of derivatives in the L\'evy LIBOR model of Eberlein and \"Ozkan (2005). Standard methods can be applied to solve the stochastic…

We propose a fast and accurate numerical method for pricing European swaptions in multi-factor Gaussian term structure models. Our method can be used to accelerate the calibration of such models to the volatility surface. The pricing of an…

We propose to take advantage of the common knowledge of the characteristic function of the swap rate process as modelled in the LIBOR Market Model with Stochastic Volatility and Displaced Diffusion (DDSVLMM) to derive analytical expressions…

We present a new model for credit index derivatives, in the top-down approach. This model has a dynamic loss intensity process with volatility and jumps and can include counterparty risk. It handles CDS, CDO tranches, Nth-to-default and…

We implement gradient-based variational inference routines for Wishart and inverse Wishart processes, which we apply as Bayesian models for the dynamic, heteroskedastic covariance matrix of a multivariate time series. The Wishart and…

We introduce a tractable multi-currency model with stochastic volatility and correlated stochastic interest rates that takes into account the smile in the FX market and the evolution of yield curves. The pricing of vanilla options on FX…

The paper proposes an expanded version of the Local Variance Gamma model of Carr and Nadtochiy by adding drift to the governing underlying process. Still in this new model it is possible to derive an ordinary differential equation for the…