We introduce a new methodology to estimate the latent factors of a multivariate jump diffusion process illustrated with an application to the commodity futures term structure. Specifically, we propose a new state space form and then use a modified Kalman filter to estimate models with latent...

This paper describes the development and initial testing of the Black-corrected version of a workhorse 3-factor Gaussian yield curve (term structure) model, the economic factor model (Dempsteret al., 2010) which we have used for many years with Monte Carlo scenario simulation for structured...

We present a novel approach to address sampling error when discretely approximating a dynamic stochastic programme with a limited finite number of scenarios to represent the underlying path probability distribution. This represents a tentative solution to the problems first identified in our...

In solving a scenario-based dynamic (multistage) stochastic programme, scenario generation plays a critical role as it forms the input specification to the optimization process. Computational bottlenecks in this process place a limit on the number of scenarios employable in approximating the...

This paper is concerned with the use of currently available technology to provide individuals, financial advisors and pension fund financial planners with detailed prospective financial plans tailored to an individual's financial goals and obligations. By taking account of all prospective cash...

This paper describes the search for a yield curve model that embodies current research but will be used for product pricing, investment advice and asset liability management over long horizons. A variety of available 3-factor affine models are implemented and tested, often with surprising...