Related papers: The Zero-Coupon Rate Model for Derivatives Pricing

We propose a modification of the classical Black-Derman-Toy (BDT) interest rate tree model, which includes the possibility of a jump with small probability at each step to a practically zero interest rate. The corresponding BDT algorithms…

In this paper we continue the research of our recent interest rate tree model called Zero Black-Derman-Toy (ZBDT) model, which includes the possibility of a jump at each step to a practically zero interest rate. This approach allows to…

We propose a model which can be jointly calibrated to the corporate bond term structure and equity option volatility surface of the same company. Our purpose is to obtain explicit bond and equity option pricing formulas that can be…

We develop an arbitrage-free random field LIBOR market model to price cross-currency derivatives. The uncertainty of the forward LIBOR rates of our cross-currency model is driven by a two time parameter random field instead of a finite…

We present a new model for credit index derivatives, in the top-down approach. This model has a dynamic loss intensity process with volatility and jumps and can include counterparty risk. It handles CDS, CDO tranches, Nth-to-default and…

I present the technique which can analyse some interest rate models: Constantinides-Ingersoll, CIR-model, geometric CIR and Geometric Brownian Motion. All these models have the unified structure of Whittaker function. The main focus of this…

In this paper, we propose and study a novel continuous-time model, based on the well-known constant elasticity of variance (CEV) model, to describe the asset price process. The basic idea is that the volatility elasticity of the CEV model…

This paper introduces a short rate model in continuous time that adds one or more memory (delay) components to the Merton model (Merton 1970, 1973) or the Vasi\v{c}ek model (Vasi\v{c}ek 1977) for the short rate. The distribution of the…

This paper studies pricing derivatives in an age-dependent semi-Markov modulated market. We consider a financial market where the asset price dynamics follow a regime switching geometric Brownian motion model in which the coefficients…

This paper formulates a model of utility for a continuous time framework that captures the decision-maker's concern with ambiguity about both volatility and drift. Corresponding extensions of some basic results in asset pricing theory are…

We develop a non-parametric, semimartingale optimal transport, calibration methodology for local volatility models with stochastic interest rate. The method finds a fully calibrated model which is the closest, in a way that can be defined…

In this paper the zero vanna implied volatility approximation for the price of freshly minted volatility swaps is generalised to seasoned volatility swaps. We also derive how volatility swaps can be hedged using a strip of vanilla options…

Pricing formulae for defaultable corporate bonds with discrete coupons under consideration of the government taxes in the united model of structural and reduced form models are provided. The aim of this paper is to generalize the…

This study delves into the temporal dynamics within the equity market through the lens of bond traders. Recognizing that the riskless interest rate fluctuates over time, we leverage the Black-Derman-Toy model to trace its temporal…

This paper explores the capabilities of the Constant Elasticity of Variance model driven by a mixed-fractional Brownian motion (mfCEV) [Axel A. Araneda. The fractional and mixed-fractional CEV model. Journal of Computational and Applied…

We design three continuous--time models in finite horizon of a commodity price, whose dynamics can be affected by the actions of a representative risk--neutral producer and a representative risk--neutral trader. Depending on the model, the…

In this paper, we consider the problem of pricing discretely-sampled variance swaps based on a hybrid model of stochastic volatility and stochastic interest rate with regime-switching. Our modelling framework extends the Heston stochastic…

The pricing of derivatives tied to baskets of assets demands a sophisticated framework that aligns with the available market information to capture the intricate non-linear dependency structure among the assets. We describe the dynamics of…

This paper investigates the pricing and hedging of variance swaps under a $3/2$ volatility model. Explicit pricing and hedging formulas of variance swaps are obtained under the benchmark approach, which only requires the existence of the…

The objective of this paper is to provide a comprehensive study no-arbitrage pricing of financial derivatives in the presence of funding costs, the counterparty credit risk and market frictions affecting the trading mechanism, such as…