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We reconsider the multivariate Kyle model in a risk-neutral setting with a single, perfectly informed rational insider and a rational competitive market maker, setting the price of n correlated securities. We prove the unicity of a…
Covariate imbalance between treatment groups makes it difficult to compare cumulative incidence curves in competing risk analyses. In this paper we discuss different methods to estimate adjusted cumulative incidence curves including inverse…
The purpose of this paper is introducing rigorous methods and formulas for bilateral counterparty risk credit valuation adjustments (CVA's) on interest-rate portfolios. In doing so, we summarize the general arbitrage-free valuation…
A multi-dimensional extension of the structural default model with firms' values driven by diffusion processes with Marshall-Olkin-inspired correlation structure is presented. Semi-analytical methods for solving the forward calibration…
When interest rate dynamics are described by the Libor Market Model as in BGM97, we show how some essential risk-management results can be obtained from the dual of the calibration program. In particular, if the objetive is to maximize…
We develop an approach to time-consistent risk evaluation of continuous-time processes in Markov systems. Our analysis is based on dual representation of coherent risk measures, differentiability concepts for multivalued mappings, and a…
We analyze the counterparty risk embedded in CDS contracts, in presence of a bilateral margin agreement. First, we investigate the pricing of collateralized counterparty risk and we derive the bilateral Credit Valuation Adjustment (CVA),…
We introduce a multiple curve framework that combines tractable dynamics and semi-analytic pricing formulas with positive interest rates and basis spreads. Negatives rates and positive spreads can also be accommodated in this framework. The…
We develop a method for computing policies in Markov decision processes with risk-sensitive measures subject to temporal logic constraints. Specifically, we use a particular risk-sensitive measure from cumulative prospect theory, which has…
In an observed generalized semi-Markov regime, estimation of transition rate of regime switching leads towards calculation of locally risk minimizing option price. Despite the uniform convergence of estimated step function of transition…
This article's aim is to provide the solution to the equity premium puzzle without using calibrated values. Calibrated values of subjective time discount factor were used in my prior derived models because 4 variables were determined from 3…
We develop a model for the dynamic evolution of default-free and defaultable interest rates in a LIBOR framework. Utilizing the class of affine processes, this model produces positive LIBOR rates and spreads, while the dynamics are…
We extend the now classic structural credit modeling approach of Black and Cox to a class of "two-factor" models that unify equity securities such as options written on the stock price, and credit products like bonds and credit default…
We consider an interest rate model with log-normally distributed rates in the terminal measure in discrete time. Such models are used in financial practice as parametric versions of the Markov functional model, or as approximations to the…
For continuing tasks, average cost Markov decision processes have well-documented value and can be solved using efficient algorithms. However, it explicitly assumes that the agent is risk-neutral. In this work, we extend risk-neutral…
We consider an HJM model setting for Markov-chain modulated forward rates. The underlying Markov chain is assumed to induce regime switches on the forward curve dynamics. Our primary focus is on the interest rate and energy futures markets.…
We relax a number of assumptions in Alexeev and Tapon (2012) in order to account for non-normally distributed, skewed, multi-regime, and leptokurtic asset return distributions. We calibrate a Markov-modulated Levy process model to equity…
We present a HJM approach to the projection of multiple yield curves developed to capture the volatility content of historical term structures for risk management purposes. Since we observe the empirical data at daily frequency and only for…
We obtain an explicit formula for the bilateral counterparty valuation adjustment of a credit default swaps portfolio referencing an asymptotically large number of entities. We perform the analysis under a doubly stochastic intensity…
The crisis that affected financial markets in the last years leaded market practitioners to revise well known basic concepts like the ones of discount factors and forward rates. A single yield curve is not sufficient any longer to describe…