Related papers: Explaining the Forward Interest Rate Term Structur…

Estimating spot covariance is an important issue to study, especially with the increasing availability of high-frequency financial data. We study the estimation of spot covariance using a kernel method for high-frequency data. In…

Fixed income markets share many features with the equity markets. However there are significant differences as well and many attempts have been done in the past to develop specific tools which describe (and possibly forecasts) the behavior…

We propose a hybrid model of portfolio credit risk where the dynamics of the underlying latent variables is governed by a one factor GARCH process. The distinctive feature of such processes is that the long-term aggregate return…

We study, both analytically and numerically, an ARCH-like, multiscale model of volatility, which assumes that the volatility is governed by the observed past price changes on different time scales. With a power-law distribution of time…

While the original Ait-Sahalia interest rate model has been found considerable use as a model for describing time series evolution of interest rates, it may not possess adequate specifications to explain responses of interest rates to…

Selfsimilar space-time fractal fluctuations are generic to dynamical systems in nature such as atmospheric flows, heartbeat patterns, population dynamics, etc. The physics of the long-range correlations intrinsic to fractal fluctuations is…

Most models for barrier pricing are designed to let a market maker tune the model-implied covariance between moves in the asset spot price and moves in the implied volatility skew. This is often implemented with a local…

This paper considers general term structure models like the ones appearing in portfolio credit risk modelling or life insurance. We give a general model starting from families of forward rates driven by infinitely many Brownian motions and…

This paper addresses the structure and dynamics of an open market economy and its relations with the real interest rate. In this respect, the paper is situated within a broad conventional literature. However, it departs from the standard…

The multifractal behavior for tick data of prices is investigated in Korean financial market. Using the rescaled range analysis(R/S analysis), we show the multifractal nature of returns for the won-dollar exchange rate and the KOSPI. We…

We study the dynamics of the linear and non-linear serial dependencies in financial time series in a rolling window framework. In particular, we focus on the detection of episodes of statistically significant two- and three-point…

Alternative risk-free rates (RFRs) play a central role in the reform of interest rate benchmarks. We study a model for RFRs driven by a general affine process. Under minimal assumptions, we derive explicit valuation formulas for…

The notion of market impact is subtle and sometimes misinterpreted. Here we argue that impact should not be misconstrued as volatility. In particular, the so-called ``square-root impact law'', which states that impact grows as the…

In this paper, we consider a discrete time economy where we assume that the short term interest rate follows a quadratic term structure of a regime switching asset process. The possible non-linear structure and the fact that the interest…

In this paper, we study the relationship between the short-end of the local and the implied volatility surfaces. Our results, based on Malliavin calculus techniques, recover the recent $\frac{1}{H+3/2}$ rule (where $H$ denotes the Hurst…

We study the short maturity asymptotics for prices of forward start Asian options under the assumption that the underlying asset follows a local volatility model. We obtain asymptotics for the cases of out-of-the-money, in-the-money, and…

The fundamental theorem behind financial markets is that stock prices are intrinsically complex and stochastic. One of the complexities is the volatility associated with stock prices. Volatility is a tendency for prices to change…

This paper provides intuition on the relationship of accrual and mark-to-market valuation for cash and forward interest rate trades. Discounted cashflow valuation is compared to spread-based valuation for forward trades, which explains the…

We study an extension of the Heston stochastic volatility model that incorporates rough volatility and jump clustering phenomena. In our model, named the rough Hawkes Heston stochastic volatility model, the spot variance is a rough…

We present a HJM approach to the projection of multiple yield curves developed to capture the volatility content of historical term structures for risk management purposes. Since we observe the empirical data at daily frequency and only for…