We study the stability of the no-arbitrage property under model uncertainty. We measure model uncertainty with the total variation distance of underlying probability distributions. We show that sufficiently small changes of the underlying probability distribution preserve the no-arbitrage...

We introduce the smooth total variation distance as a natural choice to establish equivalence. We propose asymptotic and bootstrap-based tests for which asymptotic optimality is shown. The finite sample performance is studied by simulations. Then we apply tests to real data sets. The tests are...

We introduce new equivalence tests for approximate independence in two-way contingency tables. The critical values are calculated asymptotically. The finite sample performance of the tests is improved by means of the bootstrap. An estimator of boundary points is developed to make the bootstrap...

We study the stability of the no-arbitrage property under model uncertainty. We measure model uncertainty with the total variation distance of underlying probability distributions. We show that sufficiently small changes of the underlying probability distribution preserve the no-arbitrage...

Abstract. This paper describes how an efficient and exact Monte-Carlo simulation of the Hull-White model could be performed. For that purpose the joint conditional distribution of the short interest rate and the discount factor is derived. The proposed approach can be straightforward extended to...

Interest rates are one of the main risk factors for insurance companies. Both assets and liabilities react to the movement of interest rates. Therefore, it is essential to have an adequate model of interest rates for Solvency II applications. Here, we address some of the existing issues under...

The Gaussian affine interest rate models are widely used in the financial industry for pricing, hedging and also risk management purposes. We consider the multifactor models with time dependent parameters. Usually the models are simulated using some appropriate discretization schema because the...

We introduce efficient tests for equivalence to families of multinomial distributions. Asymptotic distribution of the test statistic is derived and the local asymptotic optimality of proposed tests is shown.The finite sample performance of tests is improved by means of the parametric bootstrap....

Abstract Along the lines of Janssen's and Pfanzagl's work the testing theory for statistical functionals is further developed for non-parametric one-sample problems. Efficient tests for the one-sided and two-sided problems are derived for nonparametric statistical functionals. The asymptotic...