Related papers: Discount Models
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…
We provide a general HJM framework for forward contracts written on abstract market indices with arbitrary fixing and payment adjustments, and featuring collateralization in any currency denominations. In view of this, we first provide a…
Transition risk can be defined as the business-risk related to the enactment of green policies, aimed at driving the society towards a sustainable and low-carbon economy. In particular, the value of certain firms' assets can be lower…
This paper examines a semi-analytical approach for pricing American options in time-inhomogeneous models characterized by negative interest rates (for equity/FX) or negative convenience yields (for commodities/cryptocurrencies). Under such…
The recent financial crisis has led to so-called multi-curve models for the term structure. Here we study a multi-curve extension of short rate models where, in addition to the short rate itself, we introduce short rate spreads. In…
In this chapter we review some recent results on the dynamics of price formation in financial markets and its relations with the efficient market hypothesis. Specifically, we present the limit order book mechanism for markets and we…
Because the asset value of a private company does not observable except in quarterly reports, the structural model has not been developed for a private company. For this reason, this paper attempt to develop the Merton's structural model…
This paper presents an augmented deep factor model that generates latent factors for cross-sectional asset pricing. The conventional security sorting on firm characteristics for constructing long-short factor portfolio weights is nonlinear…
This paper is concerned with the determination of pricing strategies for a firm that in each period of a finite horizon receives replenishment quantities of a single product which it sells in two markets, e.g., a long-distance market and an…
In this paper we solve numerically a degenerate parabolic equation with dynamical boundary conditions of zero-coupon bond pricing. First, we discuss some properties of the differential equation. Then, starting from the divergent form of the…
This chapter provides a tutorial that the reader can follow towards analyzing discounting data. Previous chapters have already described the breadth of outcomes associated with discounting (Odum et al. 2020) and other background information…
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 propose and investigate two model classes for forward power price dynamics, based on continuous branching processes with immigration, and on Hawkes processes with exponential kernel, respectively. The models proposed exhibit jumps…
In this article we consider affine generalizations of the Merton jump diffusion model [Merton, J. Fin. Econ., 1976] and the respective pricing of European options. On the one hand, the Brownian motion part in the Merton model may be…
With the reform of interest rate benchmarks, interbank offered rates (IBORs) like LIBOR have been replaced by risk-free rates (RFRs), such as the Secured Overnight Financing Rate (SOFR) in the U.S. and the Euro Short-Term Rate (\euro STR)…
When designing algorithms for finite-time-horizon episodic reinforcement learning problems, a common approach is to introduce a fictitious discount factor and use stationary policies for approximations. Empirically, it has been shown that…
This paper deals with a high-order accurate implicit finite-difference approach to the pricing of barrier options. In this way various types of barrier options are priced, including barrier options paying rebates, and options on…
We consider an individual or household endowed with an initial capital and an income, modeled as a deterministic process with a continuous drift rate. At first, we model the discounting rate as the price of a zero-coupon bond at zero under…
We study the pricing problem for corporate defaultable bond from the viewpoint of the investors outside the firm that could not exactly know about the information of the firm. We consider the problem for pricing of corporate defaultable…
Although the valuation of life contingent assets has been thoroughly investigated under the framework of mathematical statistics, little financial economics research pays attention to the pricing of these assets in a non-arbitrage, complete…