Related papers: Discount Models
We introduce a class of short-rate models that exhibit a ``higher for longer'' phenomenon. Specifically, the short-rate is modeled as a general time-homogeneous one-factor Markov diffusion on a finite interval. The lower endpoint is assumed…
We introduce a novel class of credit risk models in which the drift of the survival process of a firm is a linear function of the factors. The prices of defaultable bonds and credit default swaps (CDS) are linear-rational in the factors.…
The proposed model modifies option pricing formulas for the basic case of log-normal probability distribution providing correspondence to formulated criteria of efficiency and completeness. The model is self-calibrating by historic…
An agent-based modelling methodology for the joint price evolution of two stocks is put forward. The method models future multidimensional price trajectories reflecting how a class of agents rebalance their portfolios in an operational way…
We introduce a new model for pricing corporate bonds, which is a modification of the classical model of Merton. In this new model, we drop the liquidity assumption of the firm's asset value process, and assume that there is a liquidly…
This paper considers general term structure models like the ones appearing in portfolio credit risk modelling or life insurance. We give a general model starting from families of forward rates driven by infinitely many Brownian motions and…
We explore a decomposition in which returns on a large class of portfolios relative to the market depend on a smooth non-negative drift and changes in the asset price distribution. This decomposition is obtained using general continuous…
A financial market model where agents trade using realistic combinations of buy-and-hold strategies is considered. Minimal assumptions are made on the discounted asset-price process - in particular, the semimartingale property is not…
The utility-based pricing of defaultable bonds in the case of stochastic intensity models of default risk is discussed. The Hamilton-Jacobi- Bellman (HJB) equations for the value functions is derived. A finite difference method is used to…
We introduce a Vasicek-type short rate model which has two additional parameters representing memory effect. This model presents better results in yield curve fitting than the classical Vasicek model. We derive closed-form expressions for…
We introduce a regularization approach to arbitrage-free factor-model selection. The considered model selection problem seeks to learn the closest arbitrage-free HJM-type model to any prespecified factor-model. An asymptotic solution to…
We study existence and uniqueness of the fixed points solutions of a large class of non-linear variable discounted transfer operators associated to a sequential decision-making process. We establish regularity properties of these solutions,…
To make medium- and long-term insurance products attractive, it is essential to enable participation in stock market returns. However, to eliminate downside risk, guarantees must be included, which naturally leads to the challenge of…
In finance, economics and many other fields, observations in a matrix form are often observed over time. For example, many economic indicators are obtained in different countries over time. Various financial characteristics of many…
The aim of this paper is to present a dual-term structure model of interest rate derivatives in order to solve the two hardest problems in financial modeling: the exact volatility calibration of the entire swaption matrix, and the…
At the core of insurance business lies classification between risky and non-risky insureds, actuarial fairness meaning that risky insureds should contribute more and pay a higher premium than non-risky or less-risky ones. Actuaries,…
We study the optimal stopping problem of pricing an American Put option on a Zero Coupon Bond (ZCB) in the Musiela's parametrization of the Heath-Jarrow-Morton (HJM) model for forward interest rates. First we show regularity properties of…
Motivated by a growing market that involves buying and selling data over the web, we study pricing schemes that assign value to queries issued over a database. Previous work studied pricing mechanisms that compute the price of a query by…
In contextual dynamic pricing, a seller sequentially prices goods based on contextual information. Buyers will purchase products only if the prices are below their valuations. The goal of the seller is to design a pricing strategy that…
We propose a unified framework for equity and credit risk modeling, where the default time is a doubly stochastic random time with intensity driven by an underlying affine factor process. This approach allows for flexible interactions…