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Pricing interest rate derivatives under volatility uncertainty

Holzermann, Julian - 2020

We study the pricing of contracts in fixed income markets in the presence of volatility uncertainty. We consider an … arbitrage-free bond market under volatility uncertainty. The uncertainty about the volatility is modeled by a G-Brownian motion … traditional models with the highest and lowest possible volatility. Due to these pricing formulas, the model naturally exhibits …

Persistent link: https://www.econbiz.de/10012175590

XVA of a Derivative on an Underlying Modelled by a Default Jump Process with an Analysis of CVA Wrong Way Risk for Bond Forwards

Lichtner, Mark - 2015

We consider the valuation and risk management of derivatives on defaultable assets such as bonds taking into account funding (FVA), cash collateral, underlying default, counterparty default (CVA) and default correlation using joint default poisson process. The framework can be considered as an...

Persistent link: https://www.econbiz.de/10013024060

Martingale Representation of Bond Price

LE, Truc - 2018

In practice, rather than to presume a hypothetical condition that needs be validated theoretically, it is sufficient to accept a real condition that exists and can be directly validated for practical purposes. This paper presents a practical approach to formulating the theoretical price of a...

Persistent link: https://www.econbiz.de/10012916868

Chapter 20 Fixed-income pricing

Dai, Qiang; Singleton, Kenneth J. - 2003

include affine, quadratic-Gaussian, and various stochastic volatility models of the term structure. Then we turn to models …

Persistent link: https://www.econbiz.de/10014023851

Chapter 11 Intertemporal asset pricing theory

Duffie, Darrell - 2003

, futures and forwards, option pricing under jumps and stochastic volatility, and the market valuation of corporate securities …

Persistent link: https://www.econbiz.de/10014023860

Analytical Pricing of Defaultable Discrete Coupon Bonds in Unified Model of Structural and Reduced Form Models (Two-Factor Model)

O., Hyong-Chol - 2013

Pricing formulae for defaultable corporate bonds with discrete coupons (under consideration of the government taxes) in the united model of structural and reduced form models are provided. The aim of this paper is to generalize the structural model for defaultable corporate discrete coupon bonds...

Persistent link: https://www.econbiz.de/10013074760

Options in Structured Notes : Fix the Price or Fix the Spread?

Finnerty, John D. - 2014

We derive consistent contingent-claims models for valuing implicit options embedded in structured notes, and use them to compare the cost of fixing the spread with that of fixing the price in bond tender offers. We analyze 289 bond tender offers and find that the cost difference is economically...

Persistent link: https://www.econbiz.de/10013047698

Term structure equations under benchmark framework

El Qalli, Yassine - 2009

This paper makes use of an integrated benchmark modeling framework that allows us to derive term structure equations for bond and forward prices. The benchmark or numeraire is chosen to be the growth optimal portfolio (GOP). For deterministic short rate the solution of the bond term structure...

Persistent link: https://www.econbiz.de/10011523699

Valuation of Callable/Putable Corporate Bonds in a One-Factor LogNormal Interest-Rate Model

Goldberg, Robert S. - 2020

Whereas the callable-bond market used to emphasize primarily public debt - Government Agencies, and both investment grade and non-investment corporate debt - that has changed dramatically over the past twenty years, in part due to the low prevailing rates of interest as well as some systematic...

Persistent link: https://www.econbiz.de/10012828696

Two Curves, One Price : Pricing & Hedging Interest Rate Derivatives Decoupling Forwarding and Discounting Yield Curves

Bianchetti, Marco - 2018

associated to the two yield curves, that carries on a volatility and correlation dependence. Numerical scenarios confirm that …

Persistent link: https://www.econbiz.de/10012940386