Related papers: On the implicit interest rate in the Yunus equatio…
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…
For regular parametric problems, we show how median centering of the maximum likelihood estimate can be achieved by a simple modification of the score equation. For a scalar parameter of interest, the estimator is equivariant under interest…
Geophysical flows are characterized by rapid rotation. Simulating these flows requires small timesteps to achieve stability and accuracy. Numerical stability can be greatly improved by the implicit integration of the terms that are most…
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:…
For environmental problems such as global warming future costs must be balanced against present costs. This is traditionally done using an exponential function with a constant discount rate, which reduces the present value of future costs.…
In this paper, we present own point of view how the unexpected fluctuations of the long-term real interest rate can be explained. We describe a macroeconomic environment by the modification of the fundamental macroeconomic equilibrium model…
We study dynamic mechanism design in a pure-exchange economy with privately observed idiosyncratic income. In the standard infinitely lived hidden-income benchmark of Green (1987) and Thomas-Worrall (1990), constrained-efficient allocations…
This paper presents a new estimator of the intercept of a linear regression model in cases where the outcome varaible is observed subject to a selection rule. The intercept is often in this context of inherent interest; for example, in a…
This paper aims to analyze the relationship between yield curve -being a line of the interests in various maturities at a given time- and GDP growth in Turkey. The paper focuses on analyzing the yield curve in relation to its predictive…
Prepayment risk embedded in fixed-rate mortgages forms a significant fraction of a financial institution's exposure, and it receives particular attention because of the magnitude of the underlying market. The embedded prepayment option…
Networked-guarantee loans may cause the systemic risk related concern of the government and banks in China. The prediction of default of enterprise loans is a typical extremely imbalanced prediction problem, and the networked-guarantee make…
The structural default model of Lipton and Sepp, 2009 is generalized for a set of banks with mutual interbank liabilities whose assets are driven by correlated Levy processes with idiosyncratic and common components. The multi-dimensional…
Simulators often provide the best description of real-world phenomena. However, they also lead to challenging inverse problems because the density they implicitly define is often intractable. We present a new suite of simulation-based…
The implied volatility is a crucial element of any financial toolbox, since it is used for quoting and the hedging of options as well as for model calibration. In contrast to the Black-Scholes formula its inverse, the implied volatility, is…
Most successful machine intelligence systems rely on gradient-based learning, which is made possible by backpropagation. Some systems are designed to aid us in interpreting data when explicit goals cannot be provided. These unsupervised…
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…
We study a delayed stochastic interest rate model with superlinearly growing coefficients and develop novel analytical tools to investigate the properties of both the true solution and its truncated Euler-Maruyama (TEM) approximation. In…
In the present paper, an empirical study of LIBOR (London Interbank Offered Rate) data is presented. In particular, a data set of interest rates from 1997 to 1999, for two different currencies and various maturities, is analyzed. It turns…
We consider the problem of approximating the product of $n$ expectations with respect to a common probability distribution $\mu$. Such products routinely arise in statistics as values of the likelihood in latent variable models. Motivated…
In this paper we consider a reduced-form intensity-based credit risk model with a hidden Markov state process. A filtering method is proposed for extracting the underlying state given the observation processes. The method may be applied to…