Related papers: Additive energy forward curves in a Heath-Jarrow-M…
We describe a model for evolving commodity forward prices that incorporates three important dynamics which appear in many commodity markets: mean reversion in spot prices and the resulting Samuelson effect on volatility term structure,…
We develop a unified framework for modeling multiple term structures arising in financial, insurance, and energy markets, adopting an extended Heath-Jarrow-Morton (HJM) approach under the real-world probability. We study market viability…
We present a dynamic model for forward curves within the Heath-Jarrow-Morton framework under the Musiela parametrization. The forward curves take values in a function space H, and their dynamics follows a stochastic partial differential…
The HEat modulated Infinite DImensional Heston (HEIDIH) model and its numerical approximation are introduced and analyzed. This model falls into the general framework of infinite dimensional Heston stochastic volatility models of (F.E.…
This work considers a stochastic model in which the uncertainty is driven by a multidimensional Brownian motion. The market price of risk process makes the transition between real world probability measure and risk neutral probability…
This paper proves existence of the long bond, long forward measure and long-term factorization of the stochastic discount factor (SDF) of Alvarez and Jermann (2005) and Hansen and Scheinkman (2009) in Heath-Jarrow-Morton (HJM) models in the…
A heat kernel approach is proposed for the development of a general, flexible, and mathematically tractable asset pricing framework in finite time. The pricing kernel, giving rise to the price system in an incomplete market, is modelled by…
As a consequence of the financial crises, risk management became more important and real-world dynamics of interest-rate models moved into the focus of interest. Since risk-neutral dynamics are classically important to compute prices of…
We provide a general HJM framework for forward contracts written on abstract market indices with arbitrary fixing and payment adjustments, and featuring collateralization in any currency denominations. In view of this, we first provide a…
Discount is the difference between the face value of a bond and its present value. I propose an arbitrage-free dynamic framework for discount models, which provides an alternative to the Heath--Jarrow--Morton framework for forward rates. I…
We consider a generalization of the Heath Jarrow Morton model for the term structure of interest rates where the forward rate is driven by Paretian fluctuations. We derive a generalization of It\^{o}'s lemma for the calculation of a…
This article constructs a forward exponential utility in a market with multiple defaultable risks. Using the Jacod-Pham decomposition for random fields, we first characterize forward performance processes in a defaultable market under the…
Existence of solutions to the Heath-Jarrow-Morton equation of the bond market with linear volatility and general L\'evy random factor is studied. Conditions for existence and non-existence of solutions in the class of bounded fields are…
A market with defaultable bonds where the bond dynamics is in a Heath-Jarrow-Morton setting and the forward rates are driven by an infinite number of Levy factors is considered. The setting includes rating migrations driven by a Markov…
This research addresses accurate option pricing by employing models beyond the traditional Black-Scholes framework. While Black-Scholes provides a closed-form solution, it is limited by assumptions of constant volatility, no dividends, and…
Geometric arbitrage theory reformulates a generic asset model possibly allowing for arbitrage by packaging all asset and their forward dynamics into a stochastic principal fibre bundle, with a connection whose parallel transport encodes…
We investigate the problem of pricing and hedging derivatives of Electricity Futures contract when the underlying asset is not available. We propose to use a cross hedging strategy based on the Futures contract covering the larger delivery…
This papers addresses the stock option pricing problem in a continuous time market model where there are two stochastic tradable assets, and one of them is selected as a num\'eraire. It is shown that the presence of arbitrarily small…
We price European and American exchange options where the underlying asset prices are modelled using a Merton (1976) jump-diffusion with a common Heston (1993) stochastic volatility process. Pricing is performed under an equivalent…
Mandatory emission trading schemes are being established around the world. Participants of such market schemes are always exposed to risks. This leads to the creation of an accompanying market for emission-linked derivatives. To evaluate…