Related papers: Swaption Prices in HJM model. Nonparametric fit
In this paper, a practical estimation method for a regression model is proposed using semiparametric efficient score functions applicable to data with various shapes of errors. First, I derive semiparametric efficient score vectors for a…
The aim of this paper is to investigate the use of close formula approximation for pricing European mortgage options. Under the assumption of logistic duration and normal mortgage rates the underlying price at the option expiry is…
We present high-order compact schemes for a linear second-order parabolic partial differential equation (PDE) with mixed second-order derivative terms in two spatial dimensions. The schemes are applied to option pricing PDE for a family of…
We investigate high frequency price dynamics in foreign exchange market using data from Reuters information system (the dataset has been provided to us by Ols en & Associates). In our analysis we show that a na\"ive approach to the…
We consider as given a discrete time financial market with a risky asset and options written on that asset and determine both the sub- and super-hedging prices of an American option in the model independent framework of ArXiv:1305.6008. We…
How to compute (super) hedging costs in rather general fi- nancial market models with transaction costs in discrete-time ? Despite the huge literature on this topic, most of results are characterizations of the super-hedging prices while it…
In this paper we derive semi-closed form prices of barrier (perhaps, time-dependent) options for the Hull-White model, ie., where the underlying follows a time-dependent OU process with a mean-reverting drift. Our approach is similar to…
The classical discrete time model of proportional transaction costs relies on the assumption that a feasible portfolio process has solvent increments at each step. We extend this setting in two directions, allowing for convex transaction…
The paper studies sub and super-replication price bounds for contingent claims defined on general trajectory based market models. No prior probabilistic or topological assumptions are placed on the trajectory space, trading is assumed to…
Commutation formulae with respect to a non-symmetric affine connection are obtained in this paper. The components of commutation formulae in this paper are covariant derivatives of tensors with respect to symmetric and non-symmetric affine…
We study the pricing of derivative securities in financial markets modeled by a sub-mixed fractional Brownian motion with jumps (smfBm-J), a non-Markovian process that captures both long-range dependence and jump discontinuities. Under this…
Recently, incomplete-market techniques have been used to develop a model applicable to credit default swaps (CDSs) with results obtained that are quite different from those obtained using the market-standard model. This article makes use of…
We propose a new structural model that can compute the electricity spot and forward prices in two coupled markets with limited interconnection and multiple fuels. We choose a structural approach in order to represent some key…
Split conformal prediction has recently sparked great interest due to its ability to provide formally guaranteed uncertainty sets or intervals for predictions made by black-box neural models, ensuring a predefined probability of containing…
The pricing of options, warrants and other derivative securities is one of the great success of financial economics. These financial products can be modeled and simulated using quantum mechanical instruments based on a Hamiltonian…
The utility-based pricing of defaultable bonds in the case of stochastic intensity models of default risk is discussed. The Hamilton-Jacobi- Bellman (HJB) equations for the value functions is derived. A finite difference method is used to…
Prepayment risk embedded in fixed-rate mortgages forms a significant fraction of a financial institution's exposure. The embedded prepayment option bears the same interest rate risk as an exotic interest rate swap with a suitable stochastic…
In this short note, using our geometric method introduced in a previous paper \cite{phl} and initiated by \cite{ave}, we derive an asymptotic swaption implied volatility at the first-order for a general stochastic volatility Libor Market…
We develop the HJM framework for forward rates driven by affine processes on the state space of symmetric positive matrices. In this setting we find a representation for the long-term yield and investigate the yield's asymptotic behaviour.
Asian option, as one of the path-dependent exotic options, is widely traded in the energy market, either for speculation or hedging. However, it is hard to price, especially the one with the arithmetic average price. The traditional trading…