Related papers: Polynomial term structure models
This article introduces a new mathematical concept of illiquidity that goes hand in hand with credit risk. The concept is not volume- but constraint-based, i.e., certain assets cannot be shorted and are ineligible as num\'eraire. If those…
In this paper incomplete-information models are developed for the pricing of securities in a stochastic interest rate setting. In particular we consider credit-risky assets that may include random recovery upon default. The market…
An infinite number of solvable Hamiltonians, including the transverse Ising chain, the XY chain with an external field, the cluster model with next-nearest-neighbor x-x interactions, or with next-nearest-neighbor z-z interactions, and other…
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…
In this paper a multi-factor generalization of Ho-Lee model is proposed. In sharp contrast to the classical Ho-Lee, this generalization allows for those movements other than parallel shifts, while it still is described by a recombining…
This study deals with the pricing and hedging of single-tranche collateralized debt obligations (STCDOs). We specify an affine two-factor model in which a catastrophic risk component is incorporated. Apart from being analytically tractable,…
This paper introduces a new automata-theoretic class of string-to-string functions with polynomial growth. Several equivalent definitions are provided: a machine model which is a restricted variant of pebble transducers, and a few inductive…
The classical approach in finance attempts to model the term structure of interest rates using specified stochastic processes and the no arbitrage argument. Up to now, no universally accepted theory has been obtained for the description of…
In this paper, we obtain several new factorization results for certain classes of polynomials having integer coefficients. In doing so, we use the information about prime factorization of the value taken up by such polynomials and their…
We consider an economic agent (a household or an insurance company) modelling its surplus process by a deterministic process or by a Brownian motion with drift. The goal is to maximise the expected discounted spendings/dividend payments,…
Motivated by the ultraviolet complete theory of quantum gravity, for example the string theory, we investigate a polynomial $f(R )$ inflation model in detail. We calculate the spectral index and tensor-to-scalar ratio in the $f(R )$…
In this paper, we consider a generic interest rate market in the presence of roll-over risk, which generates spreads in spot/forward term rates. We do not require classical absence of arbitrage and rely instead on a minimal market viability…
Polynomial regression is widely used and can help to express nonlinear patterns. However, considering very high polynomial orders may lead to overfitting and poor extrapolation ability for unseen data. The paper presents a method for…
This paper investigates how the discount factor and payoff functions can be identified in stationary infinite-horizon dynamic discrete choice models. In single-agent models, we show that common nonparametric assumptions on per-period…
We introduce here for the first time the long-term swap rate, characterised as the fair rate of an overnight indexed swap with infinitely many exchanges. Furthermore we analyse the relationship between the long-term swap rate, the long-term…
In this paper I consider all possible properties from commutative algebra for polynomial composites and monoid domains. The aim is full characterization of these structures. I start with the examination of group, ring, modules properties,…
We develop a version of the fundamental theorem of asset pricing for discrete-time markets with proportional transaction costs and model uncertainty. A robust notion of no-arbitrage of the second kind is defined and shown to be equivalent…
The paper considers general multiplicative models for complete and incomplete contingency tables that generalize log-linear and several other models and are entirely coordinate free. Sufficient conditions of the existence of maximum…
The aim of this paper is to present a dual-term structure model of interest rate derivatives in order to solve the two hardest problems in financial modeling: the exact volatility calibration of the entire swaption matrix, and the…
Given a locally cartesian closed category E, a polynomial (s,p,t) may be defined as a diagram consisting of three arrows in E of a certain shape. In this paper we define the homogeneous and monomial terms comprising a polynomial (s,p,t) and…