A general numerical method for pricing American options in regime switching jump diffusion models of stock dynamics with stochastic interest rates and/or volatility is developed. Time derivative and infinitesimal generator of the process for factors that determine the dynamics of the interest...

As more and more jurisdictions transition from LIBOR-type interest rate benchmarks to new riskfree rate (RFR) benchmarks based on overnight rates, such as SOFR in the US, it is important to adapt interest rate term structure models to reflect this. In particular, overnight rates are largely...

We investigate the impact of credit spreads on the stochastic duration and convexity of corporate bonds with respect to the same metrics for equivalent Treasury bonds. We show that the credit spread has two interacting effects on both the duration and the convexity of a corporate coupon bond as...

Local volatility model is a relatively simple way to capture volatility skew/smile. In spite of its drawbacks, it remains popular among practitioners for derivative pricing and hedging. For long-dated options or interest rate/equity hybrid products, in order to take into account the effect of...

We investigate the impact of credit spreads on the stochastic duration and convexity of corporate bonds with respect to the very metrics for equivalent Treasury bonds. We show that the credit spread has two interacting effects on both the duration and the convexity of a corporate coupon bond as...

Key Features:A complete introduction accessible to advanced undergraduatesAlso covers recent aspects of interest rate modelingIncludes many graphs illustrating the multidimensional aspects of interest rate modelsEach chapter is accompanied with exercises and their complete solutions.