Related papers: Rational Models for Inflation-Linked Derivatives
In this paper we develop a framework for discretely compounding interest rates which is based on the forward price process approach. This approach has a number of advantages, in particular in the current market environment. Compared to the…
Numerous kinds of uncertainties may affect an economy, e.g. economic, political, and environmental ones. We model the aggregate impact by the uncertainties on an economy and its associated financial market by randomised mixtures of L\'evy…
The crisis that affected financial markets in the last years leaded market practitioners to revise well known basic concepts like the ones of discount factors and forward rates. A single yield curve is not sufficient any longer to describe…
The paper develops general, discrete, non-probabilistic market models and minmax price bounds leading to price intervals for European options. The approach provides the trajectory based analogue of martingale-like properties as well as a…
We consider the pricing of derivatives in a setting with trading restrictions, but without any probabilistic assumptions on the underlying model, in discrete and continuous time. In particular, we assume that European put or call options…
Model risk measures consequences of choosing a model in a class of possible alternatives. We find analytical and simulated bounds for payoff functions on classes of plausible alternatives of a given discrete model. We measure the impact of…
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 derive the reconstruction formulae for the inflation model with the non-minimal derivative coupling term. If reconstructing the potential from the tensor-to-scalar ratio, we could obtain the potential without using the high friction…
We investigate the slow-roll inflation in the nonminimal derivative coupling (NDC) model with exponential, quadric, and quartic potentials. It was known that this model provides an enhanced slow-roll inflation induced by gravitationally…
A generic non-minimal coupling can push any higher-order terms of the scalar potential sufficiently far out in field space to yield observationally viable plateau inflation. We provide analytic and numerical evidence that this generically…
We consider the theory of bond discounts, defined as the difference between the terminal payoff of the contract and its current price. Working in the setting of finite-dimensional realizations in the HJM framework, under suitable notions of…
The general problem of asset pricing when the discount rate differs from the rate at which an asset's cash flows accrue is considered. A pricing kernel framework is used to model an economy that is segmented into distinct markets, each…
Using tools from spectral analysis, singular and regular perturbation theory, we develop a systematic method for analytically computing the approximate price of a derivative-asset. The payoff of the derivative-asset may be path-dependent.…
In order to overcome the drawbacks of assuming deterministic volatility coefficients in the standard LIBOR market models to capture volatility smiles and skews in real markets, several extensions of LIBOR models to incorporate stochastic…
Inflationary models with a non-zero background curvature require additional hypothesis or parameters compared to flat inflation and the procedure to construct them cannot be as simple as in the flat case. For this reason, there is no…
In the "positive interest" models of Flesaker-Hughston, the nominal discount bond system is determined by a one-parameter family of positive martingales. In the present paper we extend this analysis to include a variety of distributions for…
This article presents a possible inflation scenario as a consequence of non-minimal gravitational couplings in the Conformal Standard Model. The model consists, in comparison to the SM, of additional right-chiral neutrinos and complex…
We introduce a new and highly tractable structural model for spot and derivative prices in electricity markets. Using a stochastic model of the bid stack, we translate the demand for power and the prices of generating fuels into electricity…
We study the dynamics of a generalized inflationary model in which both the scalar field and its derivatives are coupled to the gravity. We consider a general form of the nonminimal derivative coupling in order to have a complete treatment…
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…