Related papers: Decomposing LIBOR in Transition: Evidence from the…
This paper studies subordinate Ornstein-Uhlenbeck (OU) processes, i.e., OU diffusions time changed by L\'{e}vy subordinators. We construct their sample path decomposition, show that they possess mean-reverting jumps, study their equivalent…
Overnight rates, such as the SOFR (Secured Overnight Financing Rate) in the US, are central to the current reform of interest rate benchmarks. A striking feature of overnight rates is the presence of jumps and spikes occurring at…
We present three data driven model-types for COVID-19 with a minimal number of parameters to provide insights into the spread of the disease that may be used for developing policy responses. The first is exponential growth, widely studied…
Loan seasoning and inefficient consumer interest rate refinance behavior are well-known for mortgages. Consumer automobile loans, which are collateralized loans on a rapidly depreciating asset, have attracted less attention, however. We…
Since Bitcoin first appeared on the scene in 2009, cryptocurrencies have become a worldwide phenomenon as important decentralized financial assets. Their decentralized nature, however, leads to notable volatility against traditional fiat…
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…
Recent literature seek to forecast implied volatility derived from equity, index, foreign exchange, and interest rate options using latent factor and parametric frameworks. Motivated by increased public attention borne out of the…
The collateral choice option gives the collateral posting party the opportunity to switch between different collateral currencies which is well-known to impact the asset price. Quantification of the option's value is of practical importance…
Due to the increasing popularity of futures trading among financial market participants, the risk management of these instruments is crucial. In this paper, we introduce a model for estimating the ideal time for leaving a trading position…
We present in this work some results from analysing the spread of Covid-19 in different countries and regions around the world and the potential relations with climate, geographical location, and GDP. While the situation remains dynamic, we…
Decentralized finance introduces new business models and use cases as part of digital finance. Restaking has recently emerged as a transformative mechanism in DeFi, promising extra yields but introducing complex and interconnected risks.…
The growing literature on the propagation of COVID-19 relies on various dynamic SIR-type models (Susceptible-Infected-Recovered) which yield model-dependent results. For transparency and ease of comparing the results, we introduce a common…
In this work, we investigate a biased dollar exchange model with collective debt limit, in which agents picked at random (with a rate depending on the amount of dollars they have) give at random time a dollar to another agent being picked…
We consider an interest rate model with log-normally distributed rates in the terminal measure in discrete time. Such models are used in financial practice as parametric versions of the Markov functional model, or as approximations to the…
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…
Once upon a time there was a classical financial world in which all the Libors were equal. Standard textbooks taught that simple relations held, such that, for example, a 6 months Libor Deposit was replicable with a 3 months Libor Deposits…
This paper studies the valuation of a class of default swaps with the embedded option to switch to a different premium and notional principal anytime prior to a credit event. These are early exercisable contracts that give the protection…
In this paper we are interested in term structure models for pricing zero coupon bonds under rapidly oscillating stochastic volatility. We analyze solutions to the generalized Cox-Ingersoll-Ross two factors model describing clustering of…
In this paper we study the pricing and hedging problem of a portfolio of life insurance products under the benchmark approach, where the reference market is modelled as driven by a state variable following a polynomial diffusion on a…
The modeling of the probability of joint default or total number of defaults among the firms is one of the crucial problems to mitigate the credit risk since the default correlations significantly affect the portfolio loss distribution and…