Related papers: Inflation, ECB and short-term interest rates: A ne…
We propose a model for the joint evolution of European inflation, the European Central Bank official interest rate and the short-term interest rate, in a stochastic, continuous time setting. We derive the valuation equation for a contingent…
We develop a model to price inflation and interest rates derivatives using continuous-time dynamics that have some links with macroeconomic monetary DSGE models equipped with a Taylor rule: in particular, the reaction function of the…
We formulate a forward inflation index model with multi-factor volatility structure featuring a parametric form that allows calibration to correlations between indices of different tenors observed in the market. Assuming the nominal…
Which level of inflation should Central Banks be targeting? We investigate this issue in the context of a simplified Agent Based Model of the economy. Depending on the value of the parameters that describe the behaviour of agents (in…
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…
In this paper, we establish a market model for the term structure of forward inflation rates based on the risk-neutral dynamics of nominal and real zero-coupon bonds. Under the market model, we can price inflation caplets as well as…
We construct models for the pricing and risk management of inflation-linked derivatives. The models are rational in the sense that linear payoffs written on the consumer price index have prices that are rational functions of the state…
Interest rate market models, like the LIBOR market model, have the advantage that the basic model quantities are directly observable in financial markets. Inflation market models extend this approach to inflation markets, where zero-coupon…
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…
The notion that an independent central bank reduces a country's inflation is a controversial hypothesis. To date, it has not been possible to satisfactorily answer this question because the complex macroeconomic structure that gives rise to…
This short note aims to introduce a rule which admits to compute %any time rate of interest in any time per any time, rate of inflation per any time in any moment, if the rate of interest or the rate of inflation by unity of time is an…
In the late 90's, after severe financial and economic crisis, accompanied by inflation and exchange rate instability, Eastern Europe emerged into two groups of countries with radically contrasting monetary regimes (Currency Boards and…
This article is an extension of the work of one of us (Coopersmith, 2011) in deriving the relationship between certain interest rates and the inflation rate of a two component economic system. We use the well-known Fisher relation between…
It has become standard practice to take the logarithmic growth of the scale factor as a measure of the amount of inflation, despite the well-known fact that this is only an approximation for the true amount of inflation required to solve…
We analyze the valuation partial differential equation for European contingent claims in a general framework of stochastic volatility models where the diffusion coefficients may grow faster than linearly and degenerate on the boundaries of…
The paper tests the validity of the critique of the fiscal theory of the price level. A stochastic general equilibrium model with continuous time is constructed. An active fiscal policy and a passive monetary policy have been set. Monetary…
We study the main properties of the warm inflationary model based on Barrow's solution for the scale factor of the universe. Within this framework we calculate analytically the basic slow roll parameters for different versions of warm…
We study a warm-tachyon inflationary model non-minimally coupled to a Gauss-Bonnet term. The general conditions required for reliability of the model are obtained by considerations of a combined hierarchy of Hubble and Gauss-Bonnet flow…
The problem of causal inference is to determine if a given probability distribution on observed variables is compatible with some causal structure. The difficult case is when the causal structure includes latent variables. We here introduce…
A new model for inflation using modified gravity in the Palatini formalism is constructed. Here non-minimal coupling of scalar field h with the curvature R as a general function f(R,h) is considered. Explicit inflation models for some…