In this paper we formulate the Risk Management Control problem in the interest rate area as a constrained stochastic portfolio optimization problem. The utility that we use can be any continuous function and based on the viscosity theory, the unique solution of the problem is guaranteed. The...

In this article we define a multi-factor equity-interest rate hybrid model with non-zero correlation between the stock and interest rate. The equity part is modeled by the Heston model [Heston-1993] and we use a Gaussian multi-factor short rate process [Brigo,Mercurio-2007; Hull-2006]. By...

This paper uses an extensive set of market data of forward swap rates and swaptions covering 3 July 2002 to 21 May 2009 to identify a two-dimensional stochastic volatility process for the level of rates. The process is identified step by step by increasing the requirement of the model and...

Does modelling stochastic interest rates, beyond stochastic volatility, improve pricing performanceon long-dated commodity derivatives? To answer this question, we consider futuresprice models for commodity derivatives that allow for stochastic volatility and stochastic interestrates and a...