The lognormal distribution assumption for the term structure of interest is the most natural way to exclude negative spot and forward rates. However, imposing this assumption on the continuously compounded interest rate has a serious drawback: expected rollover returns are infinite even if the...

We identify and characterize a class of term structure models where bond yields are quadratic functions of the state vector. We label this class the quadratic class and aim to lay a solid theoretical foundation for its future empirical application. We consider asset pricing in general and...

This review article describes the main contributions in the literature on term structure models of commodity prices. The first section is devoted to the theoretical analysis of the term structure. It confines itself primarily to the traditional theories of commodity prices and to their...

This review article describes the main contributions in the literature on term structure models of commodity prices. The first section is devoted to the theoretical analysis of the term structure. It confines itself primarily to the traditional theories of commodity prices and to their...

In this paper we empirically analyze and compare the Libor and Swap Market Models, developed by Brace, Gatarek, and Musiela (1997) and Jamshidian (1997), using paneldata on prices of US caplets and swaptions.A Libor Market Model can directly be calibrated to observed prices of caplets, whereas a...

This paper applies to the static hedge of barrier options a technique, mean-square hedging, designed to minimize the size of the hedging error when perfect replication is not possible. It introduces an extension of this technique which preserves the computational efficiency of mean-square...

Many economic and econometric applications require the integration of functions lacking a closed form antiderivative, which is therefore a task that can only be solved by numerical methods. We propose a new family of probability densities that can be used as substitutes and have the property of...

We investigate the relationship between the gas spot market and the price of gas storage capacity. Contrary to the common belief, the auction prices for gas storage are mostly affected by the volatility of current market prices rather than by the winter-summer price differences. This paper...