Related papers: Affine LIBOR models driven by real-valued affine p…
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 introduce affine Volterra processes, defined as solutions of certain stochastic convolution equations with affine coefficients. Classical affine diffusions constitute a special case, but affine Volterra processes are neither…
A general procedure of affinization of linear algebra structures is illustrated by the case of Leibniz algebras. Specifically, the definition of an affine Leibniz bracket, that is, a bi-affine operation on an affine space that at each…
Real life hedging in the Black-Scholes model must be imperfect and if the stock's drift is higher than the risk free rate, leads to a profit on average. Hence the option price is examined as a fair game agreement between the parties, based…
For a commodity spot price dynamics given by an Ornstein-Uhlenbeck process with Barndorff-Nielsen and Shephard stochastic volatility, we price forwards using a class of pricing measures that simultaneously allow for change of level and…
We construct a no-arbitrage model of bond prices where the long bond is used as a numeraire. We develop bond prices and their dynamics without developing any model for the spot rate or forward rates. The model is arbitrage free and all…
In the context of multi-curve modeling we consider a two-curve setup, with one curve for discounting (OIS swap curve) and one for generating future cash flows (LIBOR for a give tenor). Within this context we present an approach for the…
We propose a general framework for the simultaneous modeling of equity, government bonds, corporate bonds and derivatives. Uncertainty is generated by a general affine Markov process. The setting allows for stochastic volatility, jumps, the…
We give a collection of explicit sufficient conditions for the true martingale property of a wide class of exponentials of semimartingales. We express the conditions in terms of semimartingale characteristics. This turns out to be very…
To make medium- and long-term insurance products attractive, it is essential to enable participation in stock market returns. However, to eliminate downside risk, guarantees must be included, which naturally leads to the challenge of…
Substructural type systems, such as affine (and linear) type systems, are type systems which impose restrictions on copying (and discarding) of variables, and they have found many applications in computer science, including quantum…
We investigate flexibility of affine varieties with an action of a linear algebraic group. Flexibility of a smooth affine variety with only constant invertible functions and a locally transitive action of a reductive group is proved. Also…
A functor of sets $\mathbb X$ over the category of $K$-commutative algebras is said to be an affine functor if its functor of functions, $\mathbb A_{\mathbb X}$, is reflexive and $\mathbb X=\Spec \mathbb A_{\mathbb X}$. We prove that affine…
The main result of this paper that a martingale evolution can be chosen for Libor such that all the Libor interest rates have a common market measure; the drift is fixed such that each Libor has the martingale property. Libor is described…
This paper is concerned with finite dimensional models for the entire term structure for energy futures. As soon as a finite dimensional set of possible yield curves is chosen, one likes to estimate the dynamic behaviour of the yield curve…
In this paper, we establish a market model for the term structure of forward inflation rates based on the risk-neutral dynamics of nominal and real zero-coupon bonds. Under the market model, we can price inflation caplets as well as…
The purpose of this paper relies on the study of long term affine yield curves modeling. It is inspired by the Ramsey rule of the economic literature, that links discount rate and marginal utility of aggregate optimal consumption. For such…
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…
We discuss the pricing and hedging of volatility options in some rough volatility models. First, we develop efficient Monte Carlo methods and asymptotic approximations for computing option prices and hedge ratios in models where…
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…