Related papers: Interest rate convexity in a Gaussian framework

In covariance matrix estimation, one of the challenges lies in finding a suitable model and an efficient estimation method. Two commonly used modelling approaches in the literature involve imposing linear restrictions on the covariance…

This paper generalizes results concerning strong convexity of two-stage mean-risk models with linear recourse to distortion risk measures. Introducing the concept of (restricted) partial strong convexity, we conduct an in-depth analysis of…

This works aims at understanding further convergence properties of first order local search methods with complex geometries. We focus on the composite optimization model which unifies within a simple formalism many problems of this type. We…

We develop a version of variational inference for Bayesian count response regression-type models that possesses attractive attributes such as convexity and closed form updates. The convex solution aspect entails numerically stable fitting…

The measures of roughness of the volatility in the litterature are based on the realized volatility of high frequency data. Some authors show that this leads to a biased estimate, and does not necessarily indicate roughness of the…

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.…

Quadratic variations of Gaussian processes play important role in both stochastic analysis and in applications such as estimation of model parameters, and for this reason the topic has been extensively studied in the literature. In this…

The research presented in this article provides an alternative option pricing approach for a class of rough fractional stochastic volatility models. These models are increasingly popular between academics and practitioners due to their…

We consider a modification of the covariance function in Gaussian processes to correctly account for known linear constraints. By modelling the target function as a transformation of an underlying function, the constraints are explicitly…

We propose tests for the convexity/linearity/concavity of a transformation of the dependent variable in a semiparametric transformation model. These tests can be used to verify monotonicity of the treatment effect, or, equivalently,…

In this paper, we present own point of view how the unexpected fluctuations of the long-term real interest rate can be explained. We describe a macroeconomic environment by the modification of the fundamental macroeconomic equilibrium model…

We introduce a new model of financial market with stochastic volatility driven by an arbitrary H\"older continuous Gaussian Volterra process. The distinguishing feature of the model is the form of the volatility equation which ensures the…

We study the Hull-White model for the term structure of interest rates in the presence of volatility uncertainty. The uncertainty about the volatility is represented by a set of beliefs, which naturally leads to a sublinear expectation and…

In this paper, we discuss vector-valued Gaussian processes for the approximation of divergence- or rotation-free functions. We establish the theory for such Gaussian processes, then link the theory to multivariate approximation theory, and…

Fractional Brownian motion with the Hurst parameter $H<\frac{1}{2}$ is used widely, for instance, to describe a 'rough' stochastic volatility process in finance. In this paper, we examine an Ait-Sahalia-type interest rate model driven by a…

In this work we deal with the so-called path convexities, defined over special collections of paths. For example, the collection of the shortest paths in a graph is associated with the well-known geodesic convexity, while the collection of…

We consider a stochastic volatility asset price model in which the volatility is the absolute value of a continuous Gaussian process with arbitrary prescribed mean and covariance. By exhibiting a Karhunen-Lo\`{e}ve expansion for the…

In economic studies and popular media, interest rates are routinely cited as a major factor behind commodity price fluctuations. At the same time, the transmission channels are far from transparent, leading to long-running debates on the…

We consider slow-roll inflation for a single scalar field with an arbitrary potential and an arbitrary nonminimal coupling to the Gauss-Bonnet term. By introducing a combined hierarchy of Hubble and Gauss-Bonnet flow functions, we…

We price European options in a class of models in which the volatility of the underlying risky asset depends on the short rate of interest. Our study results in an explicit pricing formula that depends on knowledge of a characteristic…