It is shown how to construct an arbitrage-free short rate model under uncertainty about the drift and the volatility …

We study the pricing of contracts in fixed income markets in the presence of volatility uncertainty. We consider an … arbitrage-free bond market under volatility uncertainty. The uncertainty about the volatility is modeled by a G-Brownian motion … traditional models with the highest and lowest possible volatility. Due to these pricing formulas, the model naturally exhibits …

dynamics has a linear volatility function. In this paper, the model is extended to quadratic volatility functions which are the …

The credit valuation adjustment (CVA) of OTC derivatives is an important part of the Basel III credit risk capital … needed to incorporate the wrong-way risk. A semi-analytical CVA formula simplifying the interest rate swap (IRS) valuation … with the counterparty credit risk including the wrong-way risk is derived and analyzed in the paper. The formula is based …

In this paper we formulate the Risk Management Control problem in the interest rate area as a constrained stochastic … for a specific interest rate portfolio. The recent financial crisis showed that risk management of derivatives portfolios … especially in the interest rate market is crucial for the stability of the financial system. Modern Value at Risk (VAR) and …