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

Yield curve modeling is an essential problem in finance. In this work, we explore the use of Bayesian statistical methods in conjunction with Nelson-Siegel model. We present the hierarchical Bayesian model for the parameters of the…

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…

A stochastic model of short-term verbal memory is proposed, in which the psychological state of the subject is encoded as the instantaneous position of a particle diffusing over a semantic graph with a probabilistic structure. The model is…

This paper introduces the Markov-Switching Multifractal Duration (MSMD) model by adapting the MSM stochastic volatility model of Calvet and Fisher (2004) to the duration setting. Although the MSMD process is exponential $\beta$-mixing as we…

We present a new approach for the pricing of interest rate derivatives which allows a direct computation of option premiums without deriving a (Black-Scholes type) partial differential equation and without explicitly solving the stochastic…

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…

A new branch based on Markov processes is developing in the recent literature of financial time series modeling. In this paper, an Indexed Markov Chain has been used to model high frequency price returns of quoted firms. The peculiarity of…

We propose a multifractal model for short-term interest rates. The model is a version of the Markov-Switching Multifractal (MSM), which incorporates the well-known level effect observed in interest rates. Unlike previously suggested models,…

The recently introduced Gradient Methods with Memory use a subset of the past oracle information to create an accurate model of the objective function that enables them to surpass the Gradient Method in practical performance. The model…

We provide analytical pricing formula of corporate defaultable bond with both expected and unexpected default in the case with stochastic default intensity. In the case with constant short rate and exogenous default recovery using PDE…

The expOU stochastic volatility model is capable of reproducing fairly well most important statistical properties of financial markets daily data. Among them, the presence of multiple time scales in the volatility autocorrelation is perhaps…

Proportional rate models are among the most popular methods for analyzing the rate function of counting processes. Although providing a straightforward rate-ratio interpretation of covariate effects, the proportional rate assumption implies…

We develop a one-dimensional notion of affine processes under parameter uncertainty, which we call non-linear affine processes. This is done as follows: given a set of parameters for the process, we construct a corresponding non-linear…

Most of mathematic forgetting curve models fit well with the forgetting data under the learning condition of one time rather than repeated. In the paper, a convolution model of forgetting curve is proposed to simulate the memory process…

This note develops a stochastic model of asset volatility. The volatility obeys a continuous-time autoregressive equation. Conditions under which the process is asymptotically stationary and possesses long memory are characterised.…

We study properties of the additive binary Markov chain with short and long-range correlations. A new approach is suggested that allows one to express global statistical properties of a binary chain in terms of the so-called memory…

One stylized feature of financial volatility impacting the modeling process is long memory. This paper examines long memory for alternative risk measures, observed absolute and squared returns for Daily REITs and compares the findings for a…

We provide a complete representation of the interest rate in the extended CIR model. Since it was proved in Maghsoodi (1996) that the representation of the CIR process as a sum of squares of independent Ornstein-Uhlenbeck processes is…

In this paper, we extend the classical Ho-Lee binomial term structure model to the case of time-dependent parameters and, as a result, resolve a drawback associated with the model. This is achieved with the introduction of a more flexible…

The discrete-time multifactor Vasi\v{c}ek model is a tractable Gaussian spot rate model. Typically, two- or three-factor versions allow one to capture the dependence structure between yields with different times to maturity in an…