We extend the model presented in Bonollo et al. by introducing a multiscenario framework that allows for a richer and more realistic specification, including non-static (stochastic) probabilities of default and losses given default. Though more complex from a computational point of view, the...

The SABR closed-form formula (Hagan et. al 2002) is the standard for smile-consistent pricing in the swaption market. Here we address the issue of turning SABR assumptions into a consistent and arbitrage-free term structure model in the BGM/Libor Market Model framework. We compute the joint...

We introduce a new forward CPI model that is based on a multi-factor volatility structure and leads to SABR-like dynamics for forward inflation rates. Our approach is the first in the financial literature to reconcile zero-coupon and year-on-year quotes, granting, at the same time, a both fast...