Related papers: Polynomial term structure models
The paper introduces benchmark-neutral pricing and hedging for long-term contingent claims. It employs the growth optimal portfolio of the stocks as numeraire and the new benchmark-neutral pricing measure for pricing. For a realistic…
We propose a formulation to construct new classes of financial price processes based on the insight that the key variable driving prices $P$ is the earning-over-price ratio $\gamma \simeq 1/P$, which we refer to as the earning yield and is…
Much research in systemic risk is focused on default contagion. While this demands an understanding of valuation, fewer articles specifically deal with the existence, the uniqueness, and the computation of equilibrium prices in structural…
This paper proposes a novel model of financial prices where: (i) prices are discrete; (ii) prices change in continuous time; (iii) a high proportion of price changes are reversed in a fraction of a second. Our model is analytically…
In this article, we prove some factorization results for several classes of polynomials having integer coefficients, which in particular yield several classes of irreducible polynomials. Such classes of polynomials are devised by imposing…
We construct models for the pricing and risk management of inflation-linked derivatives. The models are rational in the sense that linear payoffs written on the consumer price index have prices that are rational functions of the state…
An important question in economics is how people choose between different payments in the future. The classical normative model predicts that a decision maker discounts a later payment relative to an earlier one by an exponential function…
Motivated by the definition of the edge elimination polynomial of a graph we define the covered components polynomial counting spanning subgraphs with respect to their number of components, edges and covered components. We prove a…
In this article we consider the approximation of compact linear operators defined over tensor product Hilbert spaces. Necessary and sufficient conditions on the singular values of the problem under which we can or cannot achieve different…
The paper proposes a class of financial market models which are based on inhomogeneous telegraph processes and jump diffusions with alternating volatilities. It is assumed that the jumps occur when the tendencies and volatilities are…
In this technical note, we establish an upper-bound on the threshold on the discount factor starting from which all discounted-optimal deterministic policies are gain-optimal, that we prove to be tight on an example. To address…
This paper is about models for a vector of probabilities whose elements must have a multiplicative structure and sum to 1 at the same time; in certain applications, as basket analysis, these models may be seen as a constrained version of…
In this paper we extend the series of our studies on the properties of an interacting particle model for market microstructure. In our earlier work we defined a Markov process on the majority opinion of the agents, obtained the transition…
This paper, a continuation of [3], involves a closer study of polynomials of supertropical semirings and their version of tropical geometry in which we introduce the concept of relatively prime polynomials and resultants, with the aid of…
Using simple particle models of limit order markets, we argue that mid-term over-diffusive price behaviour is inherent to the very nature of these markets. Several rules for rate changes are considered. We obtain analytical results for…
The purpose of this paper is to study the generalized Fong--Vasicek two-factor interest rate model with stochastic volatility. In this model the dispersion of the stochastic short rate (square of volatility) is assumed to be stochastic as…
We introduce a Vasicek-type short rate model which has two additional parameters representing memory effect. This model presents better results in yield curve fitting than the classical Vasicek model. We derive closed-form expressions for…
We study the topology of real polynomial maps $\mathbb{R}^{4n} \longrightarrow \mathbb{R}^{4}$ expressed in terms of bicomplex variables and their conjugates, which we refer to as bicomplex mixed polynomials. We introduce the notion of…
In a market with stochastic interest rates, we consider an investor who can either (i) invest all if his money in a savings account or (ii) purchase zero-coupon bonds and invest the remainder of his wealth in a savings account. The…
We study symplectic and projective structures on small covers over products of polygons. We introduce the factor-compatible class for small covers over products of polygons and prove that every factor-compatible small cover admits a smooth…