Related papers: Defaultable term structures driven by semimartinga…

We consider an approach to credit risk in which the information about the time of bankruptcy is modelled using a Brownian bridge that starts at zero and is conditioned to equal zero when the default occurs. This raises the question whether…

In this paper we introduce a flexible HJM-type framework that allows for consistent modelling of intraday, spot, futures, and option prices. This framework is based on stochastic processes with economic interpretations and consistent with…

We derive a general multivariate theory for realised characteristics of `model-free discretisation-invariant swaps', so-called because the standard no-arbitrage assumption of martingale forward prices is sufficient to derive fair-value swap…

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…

We consider implied volatilities in asset pricing models, where the discounted underlying is a strict local martingale under the pricing measure. Our main result gives an asymptotic expansion of the right wing of the implied volatility…

This paper completes the analysis of Choulli et al. Non-Arbitrage up to Random Horizons and after Honest Times for Semimartingale Models and contains two principal contributions. The first contribution consists in providing and analysing…

This paper analyzes the pricing of collateralized derivatives, i.e. contracts where counterparties are not only subject to financial derivatives cash flows but also to collateral cash flows arising from a collateral agreement. We do this…

We consider a continuous-time financial market with no arbitrage and no transactions costs. In this setting, we introduce two types of perpetual contracts, one in which the payoff to the long side is a fixed function of the underlyers and…

We discuss the pricing of defaultable assets in an incomplete information model where the default time is given by a first hitting time of an unobservable process. We show that in a fairly general Markov setting, the indicator function of…

We extend the valuation of contingent claims in presence of default, collateral and funding to a random functional setting and characterise pre-default value processes by martingales. Pre-default value semimartingales can also be described…

We introduce the Volterra Stein-Stein model with stochastic interest rates, where both volatility and interest rates are driven by correlated Gaussian Volterra processes. This framework unifies various well-known Markovian and non-Markovian…

We consider a short rate model, driven by a stochastic process on the cone of positive semidefinite matrices. We derive sufficient conditions ensuring that the model replicates normal, inverse or humped yield curves.

The martingale expansion provides a refined approximation to the marginal distributions of martingales beyond the normal approximation implied by the martingale central limit theorem. We develop a martingale expansion framework specifically…

We derive explicit valuation formulae for an exotic path-dependent interest rate derivative, namely an option on the composition of LIBOR rates. The formulae are based on Fourier transform methods for option pricing. We consider two models…

This paper introduces a short rate model in continuous time that adds one or more memory (delay) components to the Merton model (Merton 1970, 1973) or the Vasi\v{c}ek model (Vasi\v{c}ek 1977) for the short rate. The distribution of the…

The additive process generalizes the L\'evy process by relaxing its assumption of time-homogeneous increments and hence covers a larger family of stochastic processes. Recent research in option pricing shows that modeling the underlying log…

We undertake a study of markets from the perspective of a financial agent with limited access to information. The set of wealth processes available to the agent is structured with reasonable economic properties, instead of the usual…

Delayed outcomes are ubiquitous in online experimentation. When such a temporal dimension is present, treatment influences not only the outcome value but also the outcome timing, which can move in opposite directions. Motivated by the…

We study the forward investment performance process (FIPP) in an incomplete semimartingale market model with closed and convex portfolio constraints, when the investor's risk preferences are of the power form. We provide necessary and…

In energy markets, joint historical and implied calibration is of paramount importance for practitioners, yet notoriously challenging due to the need to align historical correlations of futures contracts with implied volatility smiles from…