Related papers: A flexible matrix Libor model with smiles

The Multi Variate Mixture Dynamics model is a tractable, dynamical, arbitrage-free multivariate model characterized by transparency on the dependence structure, since closed form formulae for terminal correlations, average correlations and…

We consider a class of asset pricing models, where the risk-neutral joint process of log-price and its stochastic variance is an affine process in the sense of Duffie, Filipovic and Schachermayer [2003]. First we obtain conditions for the…

We develop theory and applications of forward characteristic processes in discrete time following a seminal paper of Jan Kallsen and Paul Kr\"uhner. Particular emphasis is placed on the dynamics of volatility surfaces which can be easily…

This paper is a contribution to the Proceedings of the Workshop Complexity, Metastability and Nonextensivity held in Erice 20-26 July 2004, to be published by World Scientific. We propose a generalization to Merton's model for evaluating…

In this paper we analyse financial implications of exchangeability and similar properties of finite dimensional random vectors. We show how these properties are reflected in prices of some basket options in view of the well-known put-call…

We develop a multi-curve term structure setup in which the modelling ingredients are expressed by rational functionals of Markov processes. We calibrate to LIBOR swaptions data and show that a rational two-factor lognormal multi-curve model…

We consider a short rate model, driven by a stochastic process on the cone of positive semidefinite matrices. We derive sufficient conditions ensuring that the model replicates normal, inverse or humped yield curves.

We empirically investigate the functional link between the variance swap rate and the spot variance. Using S\&P500 data over the period 2006-2018, we find overwhelming empirical evidence supporting the affine link analytically found by…

One popular approach to option pricing in L\'evy models is through solving the related partial integro differential equation (PIDE). For the numerical solution of such equations powerful Galerkin methods have been put forward e.g. by Hilber…

We study the change of moduli spaces of Gieseker-semistable torsion free rank-$2$ sheaves on algebraic surfaces as we vary the polarizations. When the surfaces are rational with an effective anti-canonical divisor, the moduli spaces are…

In this paper, we consider the problem of pricing discretely-sampled variance swaps based on a hybrid model of stochastic volatility and stochastic interest rate with regime-switching. Our modelling framework extends the Heston stochastic…

We propose two methods to find a proper shift parameter in the shift-and-invert method for computing matrix exponential matrix-vector products. These methods are useful in the case of matrix exponential action has to be computed for a…

Pricing and hedging exotic options using local stochastic volatility models drew a serious attention within the last decade, and nowadays became almost a standard approach to this problem. In this paper we show how this framework could be…

We extend de Finetti's [Ann. Inst. H. Poincar\'{e} 7 (1937) 1--68] notion of exchangeability to finite and countable sequences of variables, when a subject's beliefs about them are modelled using coherent lower previsions rather than…

Discretizations of infinite-dimensional variational inequalities lead to linear and nonlinear complementarity problems with many degrees of freedom. To solve these problems in a parallel computing environment, we propose two active-set…

We propose an elementary model to price European physical delivery swaptions in multicurve setting with a simple exact closed formula. The proposed model is very parsimonious: it is a three-parameter multicurve extension of the…

Realised pay-offs for discretisation-invariant swaps are those which satisfy a restricted `aggregation property' of Neuberger [2012] for twice continuously differentiable deterministic functions of a multivariate martingale. They are…

We calibrate and test various variants of field theory models of the interest rate with data from eurodollars futures. A model based on a simple psychological factor are seen to provide the best fit to the market. We make a model…

We present an Hilbert space formulation for a set of implied volatility models introduced in \cite{BraceGoldys01} in which the authors studied conditions for a family of European call options, varying the maturing time and the strike price…

In this paper we study the pricing of exchange options under a dynamic described by stochastic correlation with random jumps. In particular, we consider a Ornstein-Uhlenbeck covariance model with Levy Background Noise Process driven by…