Related papers: Equivalence between forward rate interpolations an…
The modal factor model represents a new factor model for dimension reduction in high dimensional panel data. Unlike the approximate factor model that targets for the mean factors, it captures factors that influence the conditional mode of…
The present study deals with the analysis and mapping of Swiss franc interest rates. Interest rates depend on time and maturity, defining term structure of the interest rate curves (IRC). In the present study IRC are considered in a…
A principal with cheap capital optimally forces her counterparty to borrow at above-market rates. The reason: the form of finance is a screening device. Advances provide liquidity but pool types; contingent transfers separate types, but,…
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.…
Alternative risk-free rates (RFRs) play a central role in the reform of interest rate benchmarks. We study a model for RFRs driven by a general affine process. Under minimal assumptions, we derive explicit valuation formulas for…
In this paper we first introduce two new financial products: stock loan and capped stock loan. Then we develop a pure variational inequality method to establish explicitly the values of these stock loans. Finally, we work out ranges of fair…
Evaluating the financial performance of manufacturing firms requires consideration of both the time value of money and the relative importance of multiple decision criteria. Conventional approaches relying solely on deterministic…
Sequential models like recurrent neural networks and transformers have become standard for probabilistic multivariate time series forecasting across various domains. Despite their strengths, they struggle with capturing high-dimensional…
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…
This paper addresses the structure and dynamics of an open market economy and its relations with the real interest rate. In this respect, the paper is situated within a broad conventional literature. However, it departs from the standard…
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…
We construct a no-arbitrage model of bond prices where the long bond is used as a numeraire. We develop bond prices and their dynamics without developing any model for the spot rate or forward rates. The model is arbitrage free and all…
It is known that there exists a function interpolating a given data set such that the graph of the function is the attractor of an iterated function system which is called fractal interpolation function. We generalize the notion of fractal…
The main result of this paper that a martingale evolution can be chosen for Libor such that all the Libor interest rates have a common market measure; the drift is fixed such that each Libor has the martingale property. Libor is described…
While students may find spline interpolation quite digestible, based on their familiarity with continuity of a function and its derivatives, some of its inherent value may be missed when students only see it applied to standard data…
Forward-looking correlations are of interest in different financial applications, including factor-based asset pricing, forecasting stock-price movements or pricing index options. With a focus on non-FX markets, this paper defines necessary…
We introduce here for the first time the long-term swap rate, characterised as the fair rate of an overnight indexed swap with infinitely many exchanges. Furthermore we analyse the relationship between the long-term swap rate, the long-term…
Modeling and characterizing multiple factors is perhaps the most important step in achieving excess returns over market benchmarks. Both academia and industry are striving to find new factors that have good explanatory power for future…
We propose a variation of the forward--backward splitting method for solving structured monotone inclusions. Our method integrates past iterates and two deviation vectors into the update equations. These deviation vectors bring flexibility…
We propose a simple interpolation-based method for the efficient approximation of gradients in neural ODE models. We compare it with the reverse dynamic method (known in the literature as "adjoint method") to train neural ODEs on…