Related papers: Short-Rate Derivatives in a Higher-for-Longer Envi…
We model the term structure of the forward default intensity and the default density by using L\'evy random fields, which allow us to consider the credit derivatives with an after-default recovery payment. As applications, we study the…
We consider a general one-factor short rate model, in which the instantaneous interest rate is driven by a univariate diffusion with time independent drift and volatility. We construct recursive formula for the coefficients of the Taylor…
We present a new model for credit index derivatives, in the top-down approach. This model has a dynamic loss intensity process with volatility and jumps and can include counterparty risk. It handles CDS, CDO tranches, Nth-to-default and…
Using tools from spectral analysis, singular and regular perturbation theory, we develop a systematic method for analytically computing the approximate price of a derivative-asset. The payoff of the derivative-asset may be path-dependent.…
A small-time Edgeworth expansion of the density of an asset price is given under a general stochastic volatility model, from which asymptotic expansions of put option prices and at-the-money implied volatilities follow. A limit theorem for…
The paper presents new simple sharp bounds for transition density functions for time-homogeneous diffusions processes. The bounds are obtained under mild conditions on the drift and diffusion coefficients, extending and substantially…
The paper investigates the effect of the label green in bond markets from the lens of the trading activity. The idea is that jumps in the dynamics of returns have a specific memory nature that can be well represented through a self-exciting…
We introduce an extension of finite mixture models by incorporating skew-normal distributions within a Hidden Markov Model framework. By assuming a constant transition probability matrix and allowing emission distributions to vary according…
A simple finite element formulation of the outlet gradient boundary condition is presented in the general context of convective-diffusive transport processes. Basically, the method is based on an upstream evaluation of the dependent…
We solve the first-passage problem for the Heston random diffusion model. We obtain exact analytical expressions for the survival and hitting probabilities to a given level of return. We study several asymptotic behaviors and obtain…
We propose a model for the credit markets in which the random default times of bonds are assumed to be given as functions of one or more independent "market factors". Market participants are assumed to have partial information about each of…
Generating synthetic financial time series that preserve the statistical properties of real market data is essential for stress testing, risk model validation, and scenario design. Existing approaches struggle to simultaneously reproduce…
We study the long-term qualitative behavior of randomly perturbed dynamical systems. More specifically, we look at limit cycles of stochastic differential equations (SDE) with Markovian switching, in which the process switches at random…
We consider a Markov process $X$, which is the solution of a stochastic differential equation driven by a L\'{e}vy process $Z$ and an independent Wiener process $W$. Under some regularity conditions, including non-degeneracy of the…
We investigated distributions of short term price trends for high frequency stock market data. A number of trends as a function of their lengths was measured. We found that such a distribution does not fit to results following from an…
We study risk-neutral density extraction from short-dated option chains. As expiry approaches, option premia decline and bid--ask spreads can be large relative to prices, making mid quotes particularly uninformative. Stale or asynchronous…
We present two data-driven procedures to estimate the transition density of an homogeneous Markov chain. The first yields to a piecewise constant estimator on a suitable random partition. By using an Hellinger-type loss, we establish…
Options with maturities below one week, hereafter "ultra-short-term" options, have seen a sharp increase in trading activity in recent years. Yet, these instruments are difficult to price jointly using classical pricing models due to the…
ATSM are widely applied for pricing of bonds and interest rate derivatives but the consistency of ATSM when the short rate, r, is unbounded from below remains essentially an open question. First, the standard approach to ATSM uses the…
The article presents a general discrete time dividend valuation model when the dividend growth rate is a general continuous variable. The main assumption is that the dividend growth rate follows a discrete time semi-Markov chain with…