Related papers: Rational Models for Inflation-Linked Derivatives
We provide a general and tractable framework under which all multiple yield curve modeling approaches based on affine processes, be it short rate, Libor market, or HJM modeling, can be consolidated. We model a numeraire process and…
Inflation exhibits state-dependent, skewed, and fat-tailed dynamics that make risk a central concern for monetary policy. Accordingly, inflation risks are distributional and cannot be fully captured by mean-based models. We propose a…
In this paper we show that the dynamics associated with slow-roll models of inflation can be investigated through a method called deformation procedure. Using the latter, we explicitly derive an expression linking two slow-roll inflationary…
We model the dynamics of asset prices and associated derivatives by consideration of the dynamics of the conditional probability density process for the value of an asset at some specified time in the future. In the case where the price…
We introduce a local volatility model for the valuation of options on commodity futures by using European vanilla option prices. The corresponding calibration problem is addressed within an online framework, allowing the use of multiple…
Seemingly unrelated models of inflation that originate from different physical setups yield, in some cases, identical predictions for the currently constrained inflationary observables. In order to classify the available models, we propose…
We derive exact and closed-form expressions for a large class of two-point and three-point inflation correlators with the tree-level exchange of a single massive particle. The intermediate massive particle is allowed to have arbitrary mass,…
We model the term structure of the forward default intensity and the default density by using L\'evy random fields, which allow us to consider the credit derivatives with an after-default recovery payment. As applications, we study the…
We introduce a novel class of credit risk models in which the drift of the survival process of a firm is a linear function of the factors. The prices of defaultable bonds and credit default swaps (CDS) are linear-rational in the factors.…
In this paper, we investigate various inflation models in the context of the no-boundary proposal. We propose that a good inflation model should satisfy three conditions: observational constraints, plausible initial conditions, and…
In this paper we consider the pricing of options on interest rates such as caplets and swaptions in the L\'evy Libor model developed by Eberlein and \"Ozkan (2005). This model is an extension to L\'evy driving processes of the classical…
This paper considers the case of pricing discretely-sampled variance swaps under the class of equity-interest rate hybridization. Our modeling framework consists of the equity which follows the dynamics of the Heston stochastic volatility…
In this paper analytic formulas for electricity derivatives are calculated. To this end, we assume that electricity spot prices follow a 3-regime Markov regime-switching model with independent spikes and drops and periodic transition…
We provide a general and flexible approach to LIBOR modeling based on the class of affine factor processes. Our approach respects the basic economic requirement that LIBOR rates are non-negative, and the basic requirement from mathematical…
The programmable and composable nature of smart contract protocols has enabled the emergence of novel market structures and asset classes that are architecturally frictional to implement in traditional financial paradigms. This fluidity has…
In this paper, we propose a realistic multiple dynamic pricing approach to demand response in the retail market. First, an adaptive clustering-based customer segmentation framework is proposed to categorize customers into different groups…
In this survey paper we discuss recent advances on short interest rate models which can be formulated in terms of a stochastic differential equation for the instantaneous interest rate (also called short rate) or a system of such equations…
Multifield models of inflation with nonminimal couplings are in excellent agreement with the recent results from {\it Planck}. Across a broad range of couplings and initial conditions, such models evolve along an effectively single-field…
We investigate density perturbations generated through modulated reheating while inflation is driven by a conformally coupled scalar field. A large running of the spectral index is obtained, which reflects the basic nature of conformal…
This paper presents a new model for pricing financial derivatives subject to collateralization. It allows for collateral arrangements adhering to bankruptcy laws. As such, the model can back out the market price of a collateralized…