The paper proposes the use of the growth optimal portfolio for the construction of financial market models with unobserved factors that have to be filtered. This benchmark approach avoids any measure transformation for the pricing of derivatives. The suggested framework allows to measure the...

This paper considers interest rate term structure models in a market attracting both continuous and discrete types of uncertainty. The event driven noise is modelled by a Poisson random measure. Using as numeraire the growth optimal portfolio, interest rate derivatives are priced under the...

This report charts the history of the Quantitative Methods in Finance (QMF) conference from its beginning in 1993 to the 15th conference in 2007. It lists alphabetically the 1037 speakers who presented at all 15 conferences and the titles of their papers.

This paper points out that pseudo-random number generators in widely used standard software can generate severe distributional deviations from targeted distributions when used in parallel implementations. In Monte Carlo simulation of random walks for financial applications this can lead to...

This paper derives a two factor model for the term structure of interest rates that segments the yield curve in a natural way. The first factor involves modelling a non-negative short rate process that primarily determines the early part of the yield curve and is obtained as a truncated Gaussian...

The pricing and hedging of long dated derivative contracts is a challenging area of research. As a result of utility indifference pricing for general payoffs the growth optimal portfolio turns out to be the appropriate numeraire or benchmark with the real world probability measure as...

The objective of this paper is to consider defaultable term structure models in a general setting beyond standard risk-neutral models. Using as numeraire the growth optimal portfolio, defaultable interest rate derivatives are priced under the real-world probability measure. Therefore, the...

In finance and economics the key dynamics are often specified via stochastic differential equations (SDEs) of jump-diffusion type. The class of jump-diffusion SDEs that admits explicit solutions is rather limited. Consequently, discrete time approximations are required. In this paper we give a...

The paper describes a consistent, integrated framework for modeling and pricing in finance, insurance and other areas of risk management. The growth optimal portfolio is taken as a benchmark. In the resulting price system expected future benchmarked, nonnegative prices are not greater that the...

A Hidden Markov Model with mean reverting characteristics is considered as a model for financial time series, particularly interest rates. The optimal filter for the state of the hidden Markov chain is obtained. A number of auxiliary filters are obtained that enable the parameters of the model...