Related papers: Cross-Currency Heath-Jarrow-Morton Framework in th…
The paper studies the Heath-Jarrow-Morton-Musiela equation of the bond market. The equation is analyzed in weighted spaces of functions defined on $[0,+\infty)$. Sufficient conditions for local and global existence are obtained . 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,…
In fixed income sector, the yield curve is probably the most observed indicator by the market for trading and fifinancing purposes. A yield curve plots interest rates across different contract maturities from short end to as long as 30…
This paper considers the single factor Heath-Jarrow-Morton model for the interest rate curve with stochastic volatility. Its natural formulation, described in terms of stochastic differential equations, is solved through Monte Carlo…
In the current literature, the analytical tractability of discrete time option pricing models is guaranteed only for rather specific types of models and pricing kernels. We propose a very general and fully analytical option pricing…
This paper introduces a novel aligner for Abstract Meaning Representation (AMR) graphs that can scale cross-lingually, and is thus capable of aligning units and spans in sentences of different languages. Our approach leverages modern…
Applying the Cherny-Shiryaev-Yor invariance principle, we introduce a generalized Jarrow-Rudd (GJR) option pricing model with uncertainty driven by a skew random walk. The GJR pricing tree exhibits skewness and kurtosis in both the natural…
This paper studies optimal liquidity provision for perpetual contracts when the funding rate is a stochastic state variable. The core extension to classical market making is the coupling between inventory and funding payments: inventory…
This paper reports empirical evidence that a neural networks model is applicable to the statistically reliable prediction of foreign exchange rates. Time series data and technical indicators such as moving average, are fed to neural nets to…
Over-the-counter derivatives have contributed significantly to the effectiveness and efficiency of the international financial system but also entail significant counterparty credit risk. Collateralization is one of the most important and…
In this article, we investigate whether exchange rate risk is priced. We use a multivariate GARCH-in-Mean specification and test alternative conditional international CAPM versions. Our results support strongly the international…
We analyse two practical aspects that arise in the numerical solution of Hamilton-Jacobi-Bellman (HJB) equations by a particular class of monotone approximation schemes known as semi-Lagrangian schemes. These schemes make use of a wide…
This paper considers the modelling of collateralized debt obligations (CDOs). We propose a top-down model via forward rates generalizing Filipovi\'c, Overbeck and Schmidt (2009) to the case where the forward rates are driven by a finite…
We develop a multi-factor stochastic volatility Libor model with displacement, where each individual forward Libor is driven by its own square-root stochastic volatility process. The main advantage of this approach is that, maturity-wise,…
Global fixed income returns span across multiple maturities and economies, that is, they naturally reside on multi-dimensional data structures referred to as tensors. In contrast to standard "flat-view" multivariate models that are agnostic…
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…
Financial markets are of much interest to researchers due to their dynamic and stochastic nature. With their relations to world populations, global economies and asset valuations, understanding, identifying and forecasting trends and…
In this article we study a multi-asset version of the Merton investment and consumption problem with proportional transaction costs. In general it is difficult to make analytical progress towards a solution in such problems, but we…
In this paper we develop a framework for discretely compounding interest rates which is based on the forward price process approach. This approach has a number of advantages, in particular in the current market environment. Compared to the…
We price European and American exchange options where the underlying asset prices are modelled using a Merton (1976) jump-diffusion with a common Heston (1993) stochastic volatility process. Pricing is performed under an equivalent…