Related papers: A Vasicek-type short rate model with memory effect
Non-Markovian models have great expressive power, at the cost of complex analysis of the stochastic process. The method of Stochastic State Classes (SSCs) derives closed-form analytical expressions for the joint Probability Density…
In this paper we extend the reduced-form setting under model uncertainty introduced in [5] to include intensities following an affine process under parameter uncertainty, as defined in [15]. This framework allows to introduce a longevity…
We provide a full classification of all attainable term structure shapes in the two-factor Vasicek model of interest rates. In particular, we show that the shapes normal, inverse, humped, dipped and hump-dip are always attainable. In…
A large proportion of market making models derive from the seminal model of Avellaneda and Stoikov. The numerical approximation of the value function and the optimal quotes in these models remains a challenge when the number of assets is…
We study the high frequency price dynamics of traded stocks by a model of returns using a semi-Markov approach. More precisely we assume that the intraday returns are described by a discrete time homogeneous semi-Markov which depends also…
We present an efficient finite difference method for the computation of parameter sensitivities that is applicable to a wide class of continuous time Markov chain models. The estimator for the method is constructed by coupling the perturbed…
Memory consistency models define the order in which accesses to shared memory in a concurrent system may be observed to occur. Such models are a necessity since program order is not a reliable indicator of execution order, due to…
Interbank markets are fundamental for bank liquidity management. In this paper, we introduce a model of interbank trading with memory. Our model reproduces features of preferential trading patterns in the e-MID market recently empirically…
The generalized Langevin equation is a model for the motion of coarse-grained particles where dissipative forces are represented by a memory term. The numerical realization of such a model requires the implementation of a stochastic…
In the regime switching extension of Black-Scholes-Merton model of asset price dynamics, one assumes that the volatility coefficient evolves as a hidden pure jump process. Under the assumption of Markov regime switching, we have considered…
We derive the short-maturity asymptotics for option prices in the local volatility model in a new short-maturity limit $T\to 0$ at fixed $\rho = (r-q) T$, where $r$ is the interest rate and $q$ is the dividend yield. In cases of practical…
We consider the pricing of variable annuities (VAs) with general fee structures under popular stochastic volatility models such as Heston, Hull-White, Scott, $\alpha$-Hypergeometric, $3/2$, and $4/2$ models. In particular, we analyze the…
We focus on mean-variance hedging problem for models whose asset price follows an exponential additive process. Some representations of mean-variance hedging strategies for jump type models have already been suggested, but none is suited to…
Recent studies have identified long-range dependence as a key feature in the dynamics of both mortality and interest rates. Building on this insight, we develop a novel bi-variate stochastic framework based on mixed fractional Brownian…
In this paper we develop a framework for discretely compounding interest rates which is based on the forward price process approach. This approach has a number of advantages, in particular in the current market environment. Compared to the…
We derive an equation of motion for interest-rate yield curves by applying a minimum Fisher information variational approach to the implied probability density. By construction, solutions to the equation of motion recover observed bond…
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 propose an efficient method to evaluate callable and putable bonds under a wide class of interest rate models, including the popular short rate diffusion models, as well as their time changed versions with jumps. The method is based on…
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 study non-Markovian dynamics of a two level atom using pseudomode method. Because of the memory effect of non-Markovian dynamics, the atom receives back information and excited energy from the reservoir at a later time, which causes more…