Related papers: Swaption Prices in HJM model. Nonparametric fit
Finite mixture models are useful in applied econometrics. They can be used to model unobserved heterogeneity, which plays major roles in labor economics, industrial organization and other fields. Mixtures are also convenient in dealing with…
We present a path integral method to derive closed-form solutions for option prices in a stochastic volatility model. The method is explained in detail for the pricing of a plain vanilla option. The flexibility of our approach is…
We study convexity and monotonicity properties of option prices in a model with jumps using the fact that these prices satisfy certain parabolic integro-differential equations. Conditions are provided under which preservation of convexity…
Over the last decade, nonparametric methods have gained increasing attention for modeling complex data structures due to their flexibility and minimal structural assumptions. In this paper, we study a general multivariate nonparametric…
We study American swaptions in the linear-rational (LR) term structure model introduced in [5]. The American swaption pricing problem boils down to an optimal stopping problem that is analytically tractable. It reduces to a free-boundary…
Realised pay-offs for discretisation-invariant swaps are those which satisfy a restricted `aggregation property' of Neuberger [2012] for twice continuously differentiable deterministic functions of a multivariate martingale. They are…
We present a multivariate stochastic volatility model with leverage, which is flexible enough to recapture the individual dynamics as well as the interdependencies between several assets while still being highly analytically tractable.…
This paper gives a brief overview on the nonparametric techniques that are useful for financial econometric problems. The problems include estimation and inferences of instantaneous returns and volatility functions of time-homogeneous and…
We present a fitting formula for the non-linear evolution of the bispectrum in CDM models, obtained from measurements in high resolution numerical simulations. The formula interpolates between the perturbative and highly non-linear regimes,…
Observing prices of European put and call options, we calibrate exponential L\'evy models nonparametrically. We discuss the efficient implementation of the spectral estimation procedures for L\'evy models of finite jump activity as well as…
We describe the pricing and hedging of financial options without the use of probability using rough paths. By encoding the volatility of assets in an enhancement of the price trajectory, we give a pathwise presentation of the replication of…
Mathematical models for financial asset prices which include, for example, stochastic volatility or jumps are incomplete in that derivative securities are generally not replicable by trading in the underlying. In earlier work (2004) the…
Contrary to the claims made by several authors, a financial market model in which the price of a risky security follows a reflected geometric Brownian motion is not arbitrage-free. In fact, such models violate even the weakest no-arbitrage…
In this work we derive an approximated no-arbitrage market valuation formula for Constant Maturity Credit Default Swaps (CMCDS). We move from the CDS options market model in Brigo (2004), and derive a formula for CMCDS that is the analogous…
We provide general adaptive upper bounds for estimating nonparametric functionals based on second order U-statistics arising from finite dimensional approximation of the infinite dimensional models. We then provide examples of functionals…
The general method is proposed for constructing a family of martingale measures for a wide class of evolution of risky assets. The sufficient conditions are formulated for the evolution of risky assets under which the family of equivalent…
We consider discrete time Heath-Jarrow-Morton type interest rate models, where the interest rate curves are driven by a geometric spatial autoregression field. Strong consistency and asymptotic normality of the maximum likelihood estimators…
Given discrete time observations over a fixed time interval, we study a nonparametric Bayesian approach to estimation of the volatility coefficient of a stochastic differential equation. We postulate a histogram-type prior on the volatility…
Regime-switching models, in particular Hidden Markov Models (HMMs) where the switching is driven by an unobservable Markov chain, are widely-used in financial applications, due to their tractability and good econometric properties. In this…
We obtain option pricing formulas for stock price models in which the drift and volatility terms are functionals of a continuous history of the stock prices. That is, the stock dynamics follows a nonlinear stochastic functional differential…