This paper generalizes the framework for arbitrage-free valuation of bilateral counterparty risk to the case where collateral is included, with possible re-hypotecation. We analyze how the payout of claims is modified when collateral margining is included in agreement with current ISDA...

This paper develops a new macro-financial continuous-time model for the term structure of interest rates assuming that the instantaneous interest rate converges to a certain long-term mean level that depends on the business cycle and that the interest rate volatility depends on the interest rate...

Prices of commodities are determined by the market forces of demand and supply and susceptible to changes due to changes in market forces. The change in market forces within a short period leads to sharp change in prices leading to price volatility. Price risk is the potential for a future price...

The aim of this paper is to compare various methods which extract a Risk Neutral Density (RND) out of PIBOR as well as of Notional interest rate futures options and to investigate how traders reacted to a political event. We first focus on 5 dates surrounding the 1997 snap election and several...

The pricing of the European cash-settled swaptions is analysed. The standard market formula results are compared to results obtained from different models. Significant discrepancies are observed, justifying the title

We present a Graphics Processing Unit (GPU) parallelization of the computation of the price of exotic cross-currency interest rate derivatives via a Partial Differential Equation (PDE) approach. In particular, we focus on the GPU-based parallel pricing of long-dated foreign exchange (FX)...

This paper analyzes observed prices of U.S. temperature futures at the Chicago Mercantile Exchange (CME). Results show that an index modeling approach without detrending captures the prices exceptionally well. Moreover, weather forecasts significantly influence prices up to 11 days ahead. It is...

This work discusses the calibration of instantaneous Libor correlations in the Libor market model. We extend existing calibration strategies by incorporation of spread option implied correlation information. The correlation structure implied by CMS spread options observed in the present-day's...