It is well-known that interest rates are extremely persistent, yet they are best modeled and understood as stationary processes. These properties are contradictory in the workhorse Gaussian affine term structure model in which the persistent data often result in unit roots that imply...

This article attempts to identify the best model of the short term interest rates that can predict its stochastic process over time.We studied eight different models of interest rates in the short term. The choice of these models was the aim of analyzing the relevance of certain specifications...

We introduce a tractable multi-currency model with stochastic volatility and correlated stochastic interest rates that takes into account the smile in the FX market and the evolution of yield curves. The pricing of vanilla options on FX rates can be performed efficiently through the FFT...

This paper introduces a generalized discrete time framework to evaluate the empirical performance of a wide variety of well-known models in capturing the dynamic behavior of short term interest rates. A new class of models which displays nonlinearity and asymmetry in the drift, and incorporates...

It is well-known that interest rates are extremely persistent, yet they are best modeled and understood as stationary processes. These properties are contradictory in the workhorse Gaussian affine term structure model in which persistent data often result in unit roots that imply...

The market model of interest rates specifies simple forward or Libor rates as lognormally distributed, their stochastic dynamics has a linear volatility function. In this paper, the model is extended to quadratic volatility functions which are the product of a quadratic polynomial and a...

With model uncertainty characterized by a convex, possibly non-dominated set of probability measures, the investor minimizes the cost of hedging a path dependent contingent claim with given expected success ratio, in a discrete-time, semi-static market of stocks and options. Based on duality...

This article attempts to identify the best model of the short term interest rates that can predict its stochastic process over time. We studied nine different models of the short term interest rates. The choice of these models was the aim of analyzing the relevance of certain specifications of...