Related papers: Regime-switching affine term structures
We propose a general framework for modeling multiple yield curves which have emerged after the last financial crisis. In a general semimartingale setting, we provide an HJM approach to model the term structure of multiplicative spreads…
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…
In this paper we present elementary computations for some Markov modulated counting processes, also called counting processes with regime switching. Regime switching has become an increasingly popular concept in many branches of science. In…
We develop a general term structure framework taking stochastic discontinuities explicitly into account. Stochastic discontinuities are a key feature in interest rate markets, as for example the jumps of the term structures in…
We consider a stochastic factor financial model where the asset price process and the process for the stochastic factor depend on an observable Markov chain and exhibit an affine structure. We are faced with a finite time investment horizon…
We propose an alternative approach on the existence of affine realizations for HJM interest rate models. It is applicable to a wide class of models, and simultaneously it is conceptually rather comprehensible. We also supplement some known…
For a long time interest-rate models were built on a single yield curve used both for discounting and forwarding. However, the crisis that has affected financial markets in the last years led market players to revise this assumption and…
We introduce a multiple curve framework that combines tractable dynamics and semi-analytic pricing formulas with positive interest rates and basis spreads. Negatives rates and positive spreads can also be accommodated in this framework. The…
We present a function-valued stochastic volatility model designed to capture the continuous-time evolution of forward curves in fixed-income or commodity markets. The dynamics of the (logarithmic) forward curves are defined by a…
We develop a forward-reverse EM (FREM) algorithm for estimating parameters that determine the dynamics of a discrete time Markov chain evolving through a certain measurable state space. As a key tool for the construction of the FREM method…
In the context of multi-curve modeling we consider a two-curve setup, with one curve for discounting (OIS swap curve) and one for generating future cash flows (LIBOR for a give tenor). Within this context we present an approach for the…
This paper is concerned with finite dimensional models for the entire term structure for energy futures. As soon as a finite dimensional set of possible yield curves is chosen, one likes to estimate the dynamic behaviour of the yield curve…
We study the problem of dynamically trading futures in a regime-switching market. Modeling the underlying asset price as a Markov-modulated diffusion process, we present a utility maximization approach to determine the optimal futures…
Regime-switching models, in particular Hidden Markov Models (HMMs) where the switching is driven by an unobservable Markov chain, are widely-used in financial applications, due to their tractability and good econometric properties. In this…
This paper offers a new class of models of the term structure of interest rates. We allow each instantaneous forward rate to be driven by a different stochastic shock, constrained in such a way as to keep the forward rate curve continuous.…
In this paper, we consider a discrete time economy where we assume that the short term interest rate follows a quadratic term structure of a regime switching asset process. The possible non-linear structure and the fact that the interest…
The crisis that affected financial markets in the last years leaded market practitioners to revise well known basic concepts like the ones of discount factors and forward rates. A single yield curve is not sufficient any longer to describe…
In this paper we consider a jump-diffusion dynamic whose parameters are driven by a continuous time and stationary Markov Chain on a finite state space as a model for the underlying of European contingent claims. For this class of processes…
In this article, we consider a Markov-modulated model with jumps for short rate dynamics. We obtain closed formulas for the term structure and forward rates using the properties of the jump-telegraph process and the expectation hypothesis.…
In this paper we show how to approximate a Heath-Jarrow-Morton dynamics for the forward prices in commodity markets with arbitrage-free models which have a finite dimensional state space. Moreover, we recover a closed form representation of…