Much attention has been devoted to understanding and modeling the dynamics of implied volatility curves and surfaces. This is crucial for both trading, pricing and risk management of option positions. We suggest a simple, yet flexible, model, based on a discrete and linear Kalman filter updating...

Compound option valuation formulae give rise to the summation of a series of multinormal distribution functions. This paper presents an identity on sums of nested multinormal distributions of arbitrary dimension. We show that this identity generalizes some well-known low order identities for the...

Major financial lease contracts are commonly written on a variable interest rate basis. The conditions of this sort of lease include an interest rate variation clause which provides for adjustments to be made to the rentals when interest rates change. Such adjustments are usually made...

In this paper we develop an arbitrage-free model for the pricing of commodity derivatives. The model generates futures (or forward) commodity prices consistent with any initial term structure. The model is consistent with mean reversion in commodity prices and also generates stochastic...