Related papers: Affine LIBOR models with multiple curves: theory, …
In this paper, we study the performance of affine policies for two-stage adjustable robust optimization problem with fixed recourse and uncertain right hand side belonging to a budgeted uncertainty set. This is an important class of…
We propose a formulation to construct new classes of financial price processes based on the insight that the key variable driving prices $P$ is the earning-over-price ratio $\gamma \simeq 1/P$, which we refer to as the earning yield and is…
We provide an European option pricing formula written in the form of an infinite series of Black Scholes type terms under double Levy jumps model, where both the interest rate and underlying price are driven by Levy process. The series…
We propose a new model for the joint evolution of the European inflation rate, the European Central Bank official interest rate and the short-term interest rate, in a stochastic, continuous time setting. We derive the valuation equation for…
We consider a stochastic factor financial model where the asset price process and the process for the stochastic factor depend on an observable Markov chain and exhibit an affine structure. We are faced with a finite time investment horizon…
We introduce a novel class of credit risk models in which the drift of the survival process of a firm is a linear function of the factors. The prices of defaultable bonds and credit default swaps (CDS) are linear-rational in the factors.…
We investigate LIBOR-based derivatives using a parsimonious field theory interest rate model capable of instilling imperfect correlation between different maturities. Delta and Gamma hedge parameters are derived for LIBOR Caps against…
This paper develops a model-free framework for static fixed-income pricing and the replication of liability cash flows. We show that the absence of static arbitrage across a universe of fixed-income instruments is equivalent to the…
Consider the problem of estimating average treatment effects when a large number of covariates are used to adjust for possible confounding through outcome regression and propensity score models. The conventional approach of model building…
If $c, \overline c\colon [a,b]\to \mathbb R^2$ are two convex planar curve parameterized by affine arc length and $A\colon [a,b]\to [0,\infty)$ is the area bounded by the restriction $c\big|_{[a,s]}$ and the segment between $c(a)$ and…
We discuss a simple extension of the Ho and Lee model with generic time-dependent drift in which: 1) we compute bond prices analytically; 2) the yield curve is sensible and the asymptotic yield is positive; and 3) our analytical solution…
We derive a forward partial integro-differential equation for prices of call options in a model where the dynamics of the underlying asset under the pricing measure is described by a -possibly discontinuous- semimartingale. A uniqueness…
The logarithmic model offers new tools for image processing. An efficient method for image enhancement is to use an affine transformation with the logarithmic operations: addition and scalar multiplication. We define some criteria for…
High-dimensional recordings of dynamical processes are often characterized by a much smaller set of effective variables, evolving on low-dimensional manifolds. Identifying these latent dynamics requires solving two intertwined problems:…
We develop an expansion approach for the pricing of European quanto options written on LIBOR rates (of a foreign currency). We derive the dynamics of the system of foreign LIBOR rates under the domestic forward measure and then consider the…
Most research on fair machine learning has prioritized optimizing criteria such as Demographic Parity and Equalized Odds. Despite these efforts, there remains a limited understanding of how different bias mitigation strategies affect…
In the LIBOR market model, forward interest rates are log-normal under their respective forward measures. This note shows that their distributions under the other forward measures of the tenor structure have approximately log-normal tails.
Accurate forecasting of zero coupon bond yields for a continuum of maturities is paramount to bond portfolio management and derivative security pricing. Yet a universal model for yield curve forecasting has been elusive, and prior attempts…
By employing the technique of enlargement of filtrations, we demonstrate how to incorporate information about the future trend of the stochastic interest rate process into a financial model. By modeling the interest rate as an affine…
We study a coupled bulk-surface Allen-Cahn system with an affine linear transmission condition, that is, the trace values of the bulk variable and the values of the surface variable are connected via an affine relation, and this serves to…