Related papers: A Vasicek-type short rate model with memory effect

A new approach to describing correlation properties of complex dynamic systems with long-range memory based on a concept of additive Markov chains (Phys. Rev. E 68, 061107 (2003)) is developed. An equation connecting a memory function of…

Understanding temporal processes and their correlations in time is of paramount importance for the development of near-term technologies that operate under realistic conditions. Capturing the complete multi-time statistics defining a…

Numerous recent works target to extend effective context length for language models and various methods, tasks and benchmarks exist to measure model's effective memorization length. However, through thorough investigations, we find…

Spot option prices, forwards and options on forwards relevant for the commodity markets are computed when the underlying process S is modelled as an exponential of a process {\xi} with memory as e.g. a L\'evy semi-stationary process.…

Using a suitable change of probability measure, we obtain a novel Poisson series representation for the arbitrage- free price process of vulnerable contingent claims in a regime-switching market driven by an underlying continuous- time…

Recent empirical studies suggest that the volatilities associated with financial time series exhibit short-range correlations. This entails that the volatility process is very rough and its autocorrelation exhibits sharp decay at the…

In this paper we compare two classical one-factor diffusion models which are used to model the term structure of interest rates. One of them is based on the Wiener-Bachelier process while the second one is based on the Ornstein-Uhlenbeck…

The most commonly developed inventory models are the classical economic order quantity model, is governed by the integer order differential equations. We want to come out from the traditional thought i.e. classical order inventory model…

In this work, we consider the issue of pricing exchange options and spread options with stochastic interest rates. We provide the closed form solution for the exchange option price when interest rate is stochastic. Our result holds when…

Non-Markovian quantum processes exhibit different memory effects when measured in different ways; an unambiguous characterization of memory length requires accounting for the sequence of instruments applied to probe the system dynamics.…

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.

A new multi-factor short rate model is presented which is bounded from below by a real-valued function of time. The mean-reverting short rate process is modeled by a sum of pure-jump Ornstein--Uhlenbeck processes such that the related bond…

In this paper we provide the characterization of all finite-dimensional Heath--Jarrow--Morton models that admit arbitrary initial yield curves. It is well known that affine term structure models with time-dependent coefficients (such as the…

In this paper we present elementary computations for some Markov modulated counting processes, also called counting processes with regime switching. Regime switching has become an increasingly popular concept in many branches of science. In…

In this paper we analyse the five-factor capital market model of Munk et al.(2004). The model features a Vasicek interest rate model, an equity index with mean-reverting excess return and an index for realized inflation with mean-reverting…

We consider a financial market in which the short rate is modeled by a continuous time Markov chain (CTMC) with a finite state space. In this setting, we show how to price any financial derivative whose payoff is a function of the state of…

In this paper we introduce a class of information-based models for the pricing of fixed-income securities. We consider a set of continuous- time information processes that describe the flow of information about market factors in a monetary…

The recent financial crisis has led to so-called multi-curve models for the term structure. Here we study a multi-curve extension of short rate models where, in addition to the short rate itself, we introduce short rate spreads. In…

Inspired by a duration-dependent life insurance model, we consider continuous-time semi-Markov jump processes, initially assumed to have a finite state-space. We develop approximations using jump processes that are time-homogeneous Markov,…

For a long time interest-rate models were built on a single yield curve used both for discounting and forwarding. However, the crisis that has affected financial markets in the last years led market players to revise this assumption and…