Related papers: The Simple Yield Curve Models
The classical linear Black--Scholes model for pricing derivative securities is a popular model in financial industry. It relies on several restrictive assumptions such as completeness, and frictionless of the market as well as the…
Let $E/\mathbb{Q}$ be a semistable elliptic curve such that $\mathrm{ord}_{s=1}L(E,s) = 1$. We prove the $p$-part of the Birch and Swinnerton-Dyer formula for $E/\mathbb{Q}$ for each prime $p \geq 5$ of good reduction such that $E[p]$ is…
Although the growth of share-based payments with performance conditions (hereafter, SPPC) is prominent today, the theoretical price of SPPC has not been sufficiently studied. Reflecting such a situation, the current accounting standards for…
The hypothesis that committed revolving credit lines with fixed spreads can provide firms with interest rate insurance is a standard feature of models on these credit facilities' interest rate structure. Nevertheless, this hypothesis has…
We develop a medium-size semi-structural time series model of inflation dynamics that is consistent with the view - often expressed by central banks - that three components are important: a trend anchored by long-run expectations, a…
This paper presents a derivation of the explicit price for the perpetual American put option time-capped by the first drawdown epoch beyond a predefined level. We consider the market in which an asset price is described by geometric L\'evy…
The paper deals with a random connection model, a random graph whose vertices are given by a homogeneous Poisson point process on $\mathbb{R}^d$, and edges are independently drawn with probability depending on the locations of the two end…
We construct `self-stabilizing' processes {Z(t), t $\in [t_0,t_1)$}. These are random processes which when `localized', that is scaled around t to a fine limit, have the distribution of an $\alpha$(Z(t))-stable process, where $\alpha$ is…
Volatile electricity prices make demand response (DR) attractive for processes that can modulate their production rate. However, if nonlinear dynamic processes must be scheduled simultaneously with their local multi-energy system, the…
Tabular foundation models achieve strong accuracy on choice prediction tasks, but their predictions often violate the economic logic those tasks require: raising a price sometimes increases predicted demand, and implied willingness-to-pay…
An efficient method to price bonds with optional sinking feature is presented. Such instruments equip their issuer with the option (but not the obligation) to redeem parts of the notional prior to maturity, therefore the future cash flows…
In a stochastic volatility framework, we find a general pricing equation for the class of payoffs depending on the terminal value of a market asset and its final quadratic variation. This allows a pricing tool for European-style claims…
Perpetual American options are financial instruments that can be readily exercised and do not mature. In this paper we study in detail the problem of pricing this kind of derivatives, for the most popular flavour, within a framework in…
The price of a financial derivative can be expressed as an iterated conditional expectation, where the inner term conditions on the future of an auxiliary process. We show that this inner conditional expectation solves an SPDE (a…
The L-curve method is a well-known heuristic method for choosing the regularization parameter for ill-posed problems by selecting it according to the maximal curvature of the L-curve. In this article, we propose a simplified version that…
American put options are among the most frequently traded single stock options, and their calibration is computationally challenging since no closed-form expression is available. Due to the higher flexibility in comparison to European…
In [1], we calibrated a one-factor Cheyette SLV model with a local volatility that is linear in the benchmark forward rate and an uncorrelated CIR stochastic variance to 3M caplets of various maturities. While caplet smiles for many…
Implied volatility is at the very core of modern finance, notwithstanding standard option pricing models continue to derive option prices starting from the joint dynamics of the underlying asset price and the spot volatility. These models…
The calibration of a local volatility models to a given set of option prices is a classical problem of mathematical finance. It was considered in multiple papers where various solutions were proposed. In this paper an extension of the…
Expectiles are statistical parameters which also provide a class of sublinear risk measures in finance. They are solutions of continuous optimization problems. The corresponding first order condition provides two different fixed point…