Related papers: Affine multiple yield curve models

When interest rate dynamics are described by the Libor Market Model as in BGM97, we show how some essential risk-management results can be obtained from the dual of the calibration program. In particular, if the objetive is to maximize…

Local Volatility (LV) is a powerful tool for market modeling, enabling the generation of arbitrage-free scenarios calibrated to all European options. To implement LV, we need to interpolate and extrapolate option prices. This approach is…

Fine-tuning is widely applied in image classification tasks as a transfer learning approach. It re-uses the knowledge from a source task to learn and obtain a high performance in target tasks. Fine-tuning is able to alleviate the challenge…

The purpose of this paper relies on the study of long term affine yield curves modeling. It is inspired by the Ramsey rule of the economic literature, that links discount rate and marginal utility of aggregate optimal consumption. For such…

We extend the short rate model of Turfus and Romero-Berm\'udez [2021] to facilitate accurate arbitrage-free analytic pricing of SOFR, SONIA or ESTR caplets, i.e. options on backward-looking compounded rates payments, in a manner consistent…

We present a detailed analysis of interest rate derivatives valuation under credit risk and collateral modeling. We show how the credit and collateral extended valuation framework in Pallavicini et al (2011), and the related collateralized…

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.

The main result of this paper that a martingale evolution can be chosen for Libor such that all the Libor interest rates have a common market measure; the drift is fixed such that each Libor has the martingale property. Libor is described…

Extant literature on fair pricing methods for actuarial contexts has primarily focused on the regression setting. While such approaches are well-suited to short-term products, it is unclear how they generalize to long-term products, whose…

In energy markets, joint historical and implied calibration is of paramount importance for practitioners, yet notoriously challenging due to the need to align historical correlations of futures contracts with implied volatility smiles from…

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…

We show that, for the purpose of pricing Swaptions, the Swap rate and the corresponding Forward rates can be considered lognormal under a single martingale measure. Swaptions can then be priced as options on a basket of lognormal assets and…

We introduce a tractable multi-currency model with stochastic volatility and correlated stochastic interest rates that takes into account the smile in the FX market and the evolution of yield curves. The pricing of vanilla options on FX…

We introduce a novel multi-factor Heston-based stochastic volatility model, which is able to reproduce consistently typical multi-dimensional FX vanilla markets, while retaining the (semi)-analytical tractability typical of affine models…

The LIBOR Market Model (LMM) is a widely used model for pricing interest rate derivatives. While the Black-Scholes model is well-known for pricing stock derivatives such as stock options, a larger portion of derivatives are based on…

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…

This article provides the mathematical foundation for stochastically continuous affine processes on the cone of positive semidefinite symmetric matrices. This analysis has been motivated by a large and growing use of matrix-valued affine…

This article proposes a calibration framework for complex option pricing models that jointly fits market option prices and the term structure of variance. Calibrated models under the conventional objective function, the sum of squared…

The aim of this thesis is to analyze and renovate few main-stream models on inflation derivatives. In the first chapter of the thesis, concepts of financial instruments and fundamental terms are introduced, such as coupon bond,…

We introduce a new framework for optimal routing and arbitrage in AMM driven markets. This framework improves on the original best-practice convex optimization by restricting the search to the boundary of the optimal space. We can…