Related papers: Regime-switching affine term structures
A Markovian modulation captures the trend in the market and influences the market coefficients accordingly. The different scenarios presented by the market are modeled as the distinct states of a discrete-time Markov chain. In our paper, we…
We present a HJM approach to the projection of multiple yield curves developed to capture the volatility content of historical term structures for risk management purposes. Since we observe the empirical data at daily frequency and only for…
A new modelling approach that directly prescribes dynamics to the term structure of VIX futures is proposed in this paper. The approach is motivated by the tractability enjoyed by models that directly prescribe dynamics to the VIX,…
We develop a unified framework for modeling multiple term structures arising in financial, insurance, and energy markets, adopting an extended Heath-Jarrow-Morton (HJM) approach under the real-world probability. We study market viability…
This paper studies the pricing of European-style Asian options when the price dynamics of the underlying risky asset are assumed to follow a Markov- modulated geometric Brownian motion; that is, the appreciation rate and the volatility of…
This paper deals with optimal prediction in a regime-switching model driven by a continuous-time Markov chain. We extend existing results for geometric Brownian motion by deriving optimal stopping strategies that depend on the current…
In the literature of Round-Robin scheduling scheme, each job is processed, one after the another after giving a fix quantum. In case of First-come first-served, each process is executed, if the previously arrived processed is completed.…
The analytical tractability of affine (short rate) models, such as the Vasicek and the Cox-Ingersoll-Ross models, has made them a popular choice for modelling the dynamics of interest rates. However, in order to account properly for the…
Accurate estimation of Marginal Emission Factors (MEFs) is critical for evaluating the decarbonization potential of low-carbon technologies and demand-side management. However, canonical methodologies, predominantly relying on linear…
A market with defaultable bonds where the bond dynamics is in a Heath-Jarrow-Morton setting and the forward rates are driven by an infinite number of Levy factors is considered. The setting includes rating migrations driven by a Markov…
We provide a unified framework for modeling LIBOR rates using general semimartingales as driving processes and generic functional forms to describe the evolution of the dynamics. We derive sufficient conditions for the model to be…
The idea of forward rates stems from interest rate theory. It has natural connotations to transition rates in multi-state models. The generalization from the forward mortality rate in a survival model to multi-state models is non-trivial…
We propose a formulation of the term structure of interest rates in which the forward curve is seen as the deformation of a string. We derive the general condition that the partial differential equations governing the motion of such string…
We introduce a framework that allows to employ (non-negative) measure-valued processes for energy market modeling, in particular for electricity and gas futures. Interpreting the process' spatial structure as time to maturity, we show how…
This project attempts to address the problem of asset pricing in a financial market, where the interest rates and volatilities exhibit regime switching. This is an extension of the Black-Scholes model. Studies of Markov-modulated regime…
The shortcomings of the popular Black-Scholes-Merton (BSM) model have led to models which could more accurately model the behavior of the underlying assets in energy markets, particularly in electricity and future oil prices. In this paper…
This paper advances interest rate modeling in the post-LIBOR era by introducing rough stochastic volatility into the Forward Market Model (FMM). We establish a rigorous asymptotic expansion of swaption implied volatility, connecting the FMM…
Financial markets tend to switch between various market regimes over time, making stationarity-based models unsustainable. We construct a regime-switching model independent of asset classes for risk-adjusted return predictions based on…
This article presents a generic framework for modeling the dynamics of forward curves in commodity market as commodity derivatives are typically traded by futures or forwards. We have theoretically demonstrated that commodity prices are…
We investigate the existence of affine realizations for term structure models driven by L\'evy processes. It turns out that we obtain more severe restrictions on the volatility than in the classical diffusion case without jumps. As special…