We propose a numerical procedure for the pricing of financial contracts whose contingent claims are exposed to two sources of risk: the stock price and the short interest rate. More precisely, in our pricing framework we assume that the stock price dynamics is described by the Cox, Ross...

For an economy characterized by neo-Keynesian wage rigidity, an optimal open market rule is derived based on financial market information, including auction price behavior. Simulations of a small model of the United States--estimated via full information maximum likelihood together with a...

A one-dimensional partial differential-difference equation (pdde) under forward measure is developed to value European option under jump-diffusion, stochastic interest rate and local volatility. The corresponding forward Kolmogorov partial differential-difference equation for transition...

European option under local volatility and Cox-Ingersoll-Ross model of short rate is computed from one-dimensional partial differential equations: the Black-Scholes equation for option price and the forward Kolmogorov equation for probability transition density. Both the computations are...

The goal of this paper is to help the motivated students with their course on interest rate modeling and/or to help them learn the LIBOR model by themselves. It implies the reader knows what forward rates, caps, and swap[tion]s are and has some knowledge of the quantitative finance: at least Ito...

In this paper we investigate the consequences on the pricing of insurance contingent claims when we relax the typical independence assumption made in the actuarial literature between mortality risk and interest rate risk. Starting from the Gaussian approach of Liu et al. (2014), we consider more...

Interest rate models are a workhorse for risk and asset managers, in particular for those overseeing long term investments. This paper discusses the suitability of admissible Affine Term Structure Model for risk management applications, and presents some results of two models: A parsimonious...

This paper presents an Equity-IR hybrid model that fits in the class of affine diffusion processes. In the absence of cash dividend payment, the moment generating function can be easily and rapidly computed. This allows for an efficient calibration of the model based on Vanilla European Options...

The Polynomial Chaos Expansion (PCE) technique recovers a finite second order random variable exploiting suitable linear combinations of orthogonal polynomials which are functions of a given stochastic quantity $\xi$, hence acting as a kind of random basis. The PCE methodology has been developed...