We review and construct consistent in-sample specification and out-of-sample model selection tests on conditional distributions and predictive densities associated with continuous multifactor (possibly with jumps) and (non)linear discrete models of the short term interest rate. The results of...

This paper studies dynamic relation, namely, two currencies of Korean won and Japanese yen, before and after the East Asian financial crisis of the late 1990s. We conjecture that there exists a long-run relation between won and yen, which is characterized by a band-reverting-type dynamic...

In this article we present an efficient optimization for calculating the exposure and CVA for large portfolios of vanilla swaps. It is based on a "thin-out" procedure applied to fixed payment streams, which reduces a very frequent stream of payments to a much less frequent one. The procedure...

In this paper, we present advanced analytical formulas for SABR model option pricing. The first technical result consists of a new exact formula for the zero correlation case. This closed form is a simple 2D integration of elementary functions, particularly attractive for numerical...

The complexity of the world oil market has increased dramatically in recent years and new approaches are needed to understand, model, and forecast oil prices today. Many models have been explored and most of the papers and modeling projects referenced in this paper identify their own...

Operational risk data, when available, are usually scarce, heavy-tailed and possibly dependent. In this work, we introduce a model that captures such real-world characteristics and explicitly deals with heterogeneous pairwise and tail dependence of losses. By considering flexible families of...

This paper introduces the class of volatility modulated Lévy-driven Volterra (VMLV) processes and their important subclass of Lévy semistationary (LSS) processes as a new framework for modelling energy spot prices. The main modelling idea consists of four principles: First, deseasonalised spot...

This paper proposes a simple method to structurally estimate a model over a period of time containing a regime shift. It then evaluates to which degree it is relevant to explicitly acknowledge the break in the estimation procedure. We apply our method on Swedish data, and estimate a DSGE model...

Based on the seminal paper of Farrell (1957), researchers have developed several methods for measuring effi ciency. Nowadays, the most prominent representatives are nonparametric data envelopment analysis (DEA) and parametric stochastic frontier analysis (SFA), both introduced in the late 1970s....

This paper presents a mathematical model to evaluate the risks of arbitration in contractual disputes to decide whether or not to raise an arbitration case for a claim. It adds the ingredient of a regret theory approach for taking that decision, if an amicable settlement amount is not agreed....