We extend the LIBOR market model to accommodate the new market practice of using different forward and discount curves in the pricing of interest-rate derivatives. Our extension is based on modeling the joint evolution of forward rates belonging to the discount curve and corresponding spreads...

We develop an asymptotic expansion technique for pricing timer options under general stochastic volatility models around small volatility of variance. Closed-form approximation formulas have been obtained for the Heston model and the 3/2-model. The approximation has an easy-to-understand...

We extend Piterbarg's (2010) result on European-style derivative pricing under collateralization by relaxing the assumption of a single unsecured funding rate. Introducing different lending and borrowing rates has the effect of producing non-linear price functionals for general claims. Buyer and...

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...

We try and apply the single-scenario version of the general model in Castagna, Mercurio and Mosconi (2010) to the pricing of CDOs. We are able to establish a unified approach to both evaluate the Credit VaR and the risk of structured products, and thus evaluate on a consistent and uniform basis...

Recent empirical studies on interest rate derivatives have shown that the volatil- ity structure of interest rates is frequently humped. Mercurio and Moraleda (1996) and Moraleda and Vorst (1996a) have modelled interest rate dynamics in such a way that humped volatility structures are possible...