Related papers: Discount Models
There is an observed basis between repo discounting, implied from market repo rates, and bond discounting, stripped from the market prices of the underlying bonds. Here, this basis is explained as a convexity effect arising from the…
We propose a general framework for the simultaneous modeling of equity, government bonds, corporate bonds and derivatives. Uncertainty is generated by a general affine Markov process. The setting allows for stochastic volatility, jumps, the…
This paper introduces a no-arbitrage, Monte Carlo-free approach to pricing path-dependent interest rate derivatives. The Heath-Jarrow-Morton model gives arbitrage-free contingent claims prices but is infinite-dimensional, making traditional…
We construct a no-arbitrage model of bond prices where the long bond is used as a numeraire. We develop bond prices and their dynamics without developing any model for the spot rate or forward rates. The model is arbitrage free and all…
One of the peculiarities of power and gas markets is the delivery mechanism of forward contracts. The seller of a futures contract commits to deliver, say, power, over a certain period, while the classical forward is a financial agreement…
We propose a model for the credit markets in which the random default times of bonds are assumed to be given as functions of one or more independent "market factors". Market participants are assumed to have partial information about each of…
We present a thorough empirical study on real interest rates by also including risk aversion through the introduction of the market price of risk. With the view of complex systems science and its multidisciplinary approach, we use the…
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…
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 introduce a class of information-based models for the pricing of fixed-income securities. We consider a set of continuous- time information processes that describe the flow of information about market factors in a monetary…
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…
An agent-based model for financial markets has to incorporate two aspects: decision making and price formation. We introduce a simple decision model and consider its implications in two different pricing schemes. First, we study its…
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.…
We consider a dynamic pricing problem where customer response to the current price is impacted by the customer price expectation, aka reference price. We study a simple and novel reference price mechanism where reference price is the…
When decision makers evaluate a sequence of rewards, they may pay more attention to larger rewards and, given attention is limited, less attention to smaller rewards. They may also become less attentive to each reward when attention is…
Stochastic dividend discount models (Hurley and Johnson, 1994 and 1998, Yao, 1997) present expressions for the expected value of stock prices when future dividends evolve according to some random scheme. In this paper we try to offer a more…
We consider high-dimensional asset price models that are reduced in their dimension in order to reduce the complexity of the problem or the effect of the curse of dimensionality in the context of option pricing. We apply model order…
In this article we show how to analyze the covariation of bond prices nonparametrically and robustly, staying consistent with a general no-arbitrage setting. This is, in particular, motivated by the problem of identifying the number of…
Over the last decade, dividends have become a standalone asset class instead of a mere side product of an equity investment. We introduce a framework based on polynomial jump-diffusions to jointly price the term structures of dividends and…
Formulating a real-world problem under the Reinforcement Learning framework involves non-trivial design choices, such as selecting a discount factor for the learning objective (discounted cumulative rewards), which articulates the planning…