We develop a multi-curve term structure setup in which the modelling ingredients are expressed by rational functionals of Markov processes. We calibrate to LIBOR swaptions data and show that a rational two-factor lognormal multi-curve model is sufficient to match market data with accuracy. We...

We introduce a multiple curve LIBOR framework that combines tractable dynamics and semi-analytic pricing formulas with positive interest rates and basis spreads. The dynamics of OIS and LIBOR rates are specified following the methodology of the affine LIBOR models and are driven by the wide and...

The aim of this work is to provide fast and accurate approximation schemes for the Monte Carlo pricing of derivatives in LIBOR market models. Standard methods can be applied to solve the stochastic differential equations of the successive LIBOR rates but the methods are generally slow. Our...

The authors present an analytical approximation formula for zero-coupon bond prices in a one-factor term structure model where the short interest rate follows a lognormal diffusion. An analytical bound on the error is also derived and is used to show that the pricing formula is virtually exact...

Arbitrage-free pricing of American options on bonds in one-factor dynamic term structure models is investigated. We re-derive a general decomposition result which states that the American bond option premium can be split into the value of an otherwise equivalent European option and an early...

The paper is in two major parts. In the setup of a standard continuous time model of a financial market with interest rate risk only, we first provide a comprehensible and intuitive exposition of the foundation for and relation between three valuation methodologies: the classical no arbitrage...

This paper sets up a model for the valuation of traditional participating life insurance policies. These claims are characterized by their explicit interest rate guarantees and by various embedded option elements, such as bonus and surrender options. Owing to the structure of these contracts,...

The paper sets up a stylized, dynamic model for a life insurance company in which the issues of embedded option and interest rate guarantee valuation, insolvency risk management, and market valuation of the balance sheet elements as well as some additional issues can be analyzed. The liability...

This paper develops and estimates a model for the bonus-crediting mechanism in relation to with-profits policies issued by Danish life insurance and pension companies. The market for pension and life insurance savings contracts is generally highly opaque, but our proposed model explains a...