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The Affine Heston Model with Correlated Gaussian Interest Rates for Pricing Hybrid Derivatives

Grzelak, Lech A. - 2014

In this article we define a multi-factor equity-interest rate hybrid model with non-zero correlation between the stock and interest rate. The equity part is modeled by the Heston model [Heston-1993] and we use a Gaussian multi-factor short rate process [Brigo,Mercurio-2007; Hull-2006]. By...

Persistent link: https://www.econbiz.de/10013070982

Minimal Variance Hedging in Multi-Curve Interest Rate Modeling

Hess, Markus - 2019

We consider minimal variance hedging in a pure-jump multi-curve interest rate model. In the first part, we derive arithmetic multi-factor martingale representations for the spread, OIS and LIBOR rate which are bounded from below by a real-valued constant. In the second part, we investigate...

Persistent link: https://www.econbiz.de/10012902260

Efficient and Exact Simulation of the Gaussian Affine Interest Rate Models (with Application to the Hull White Model and G2++ Model)

Ostrovski, Vladimir - 2018

The Gaussian affine interest rate models are widely used in the financial industry for pricing, hedging and also risk …

Persistent link: https://www.econbiz.de/10012935570

Stochastic interest rate modelling using a single or multiple curves : an empirical performance analysis of the Lévy forward price model

Verschuren, Robert Matthijs - 2020

In current financial markets negative interest rates have become rather persistent, while in theory it is often common … practice to discard such rates as incredible and irrelevant. However, from a risk management perspective, it is crucially … optimisation routine for calibrating this LFPM under the risk-neutral measure in both the single and multiple curve framework to …

Persistent link: https://www.econbiz.de/10012852344

Pricing American Interest Rate Options Under the Jump-Extended Constant-Elasticity-of-Variance Short Rate Models

Beliaeva, Natalia - 2020

This paper demonstrates how to value American interest rate options under the jump extended constant-elasticity-of-variance (CEV) models. We consider both exponential jumps (see Duffie, Pan, and Singleton (2000)) and lognormal jumps (see Johannes (2004)) in the short rate process. We show how to...

Persistent link: https://www.econbiz.de/10012857481

A term-structure model for dividends and interest rates

Filipović, Damir; Willems, Sander - 2017

Over the last decade, dividends have become a standalone asset class instead of a mere side product of an equity investment. We introduce a framework based on polynomial jump-diffusions to jointly price the term structures of dividends and interest rates. Prices for dividend futures, bonds, and...

Persistent link: https://www.econbiz.de/10011874740