A locally-built, LLM-digested index of recent arXiv papers in quant finance, geometry/topology, and statistical ML — keyword search served straight from SQLite on this machine.
Developed unbiased estimators for Heston model with stochastic interest rates.
The paper analyzes insurance risks using stochastic models.
We introduce a tractable multi-currency model with stochastic volatility and correlated stochastic interest rates that takes into account the smile in the FX market and the evolution of yield curves. The pricing of vanilla options on FX rates can be performed effciently through the FFT methodology thanks to the affinit…
Proposes new Monte Carlo methods for calibrating local volatility models with stochastic components.
Enhances valuation of variable annuities with stochastic interest rate models.
In this survey paper we discuss recent advances on short interest rate models which can be formulated in terms of a stochastic differential equation for the instantaneous interest rate (also called short rate) or a system of such equations in case the short rate is assumed to depend also on other stochastic factors. Ou…
Study optimizes dividend payout strategies under fluctuating interest rates.
Study proves convergence of interest rate model approximations.
Derives equations for life insurance reserves with interest rate uncertainty.
We extend Dupire's formula for stochastic interest rates and local volatility.
By employing the technique of enlargement of filtrations, we demonstrate how to incorporate information about the future trend of the stochastic interest rate process into a financial model. By modeling the interest rate as an affine diffusion process, we obtain explicit formulas for the additional expected logarithmic…
This paper offers a new class of models of the term structure of interest rates. We allow each instantaneous forward rate to be driven by a different stochastic shock, constrained in such a way as to keep the forward rate curve continuous. We term the process followed by the shocks to the forward curve ``stochastic str…
Study pricing of American put options with stochastic interest rate and finite maturity.
In this paper, we consider the problem of pricing discretely-sampled variance swaps based on a hybrid model of stochastic volatility and stochastic interest rate with regime-switching. Our modelling framework extends the Heston stochastic volatility model by including the CIR stochastic interest rate and model paramete…
In 'A Closed-Form Solution for Options with Stochastic Volatility with Applications to Bond and Currency Options', Heston proposes a Stochastic Volatility (SV) model with constant interest rate and derives a semi-explicit valuation formula. Heston also describes, in general terms, how the model could be extended to inc…
A new method approximates option pricing in stochastic interest rate markets.
Unified model for financial derivatives pricing with stochastic interest rates.
The paper models stochastic interest rates for life insurance using phase-type distributions.
New model for options pricing accounting for time-varying interest rates, volatility, and equity premium.
Develops a bi-variate stochastic framework to model mortality and interest rates with long-range dependence.
Modeling climate change costs with stochastic interest rates shows inequality, but funding abatement can reduce this.
Develops a new method for pricing GMWBs with jumps and stochastic interest rates.
Unified model for equity option pricing and interest-rate risk assessment.
Optimal dividend strategy in dual risk model is well studied in the literatures. But to the best of our knowledge, all the previous works assumes deterministic interest rate. In this paper, we study the optimal dividends strategy in dual risk model, under a stochastic interest rate, assuming the discounting factor foll…
The paper develops a valuation framework for GLWB-LTC contracts with Levy dynamics and stochastic interest rates.
Method calibrates stock price models with stochastic interest rates using optimal transport.
We propose a robust and stable lattice method which permits to obtain very accurate American option prices in presence of CIR stochastic interest rate without any numerical restriction on its parameters. Numerical results show the reliability and the accuracy of the proposed method.
We present a family of models for the term structure of interest rates which describe the interest rate curve as a stochastic process in a Hilbert space. We start by decomposing the deformations of the term structure into the variations of the short rate, the long rate and the fluctuations of the curve around its avera…
Study on interest rate model with jumps, proving strong convergence in simulations.
This paper considers the case of pricing discretely-sampled variance swaps under the class of equity-interest rate hybridization. Our modeling framework consists of the equity which follows the dynamics of the Heston stochastic volatility model, and the stochastic interest rate is driven by the Cox-Ingersoll-Ross (CIR)…
Method calibrates local volatility and stochastic short rate models for equity-rate dynamics.
Novel pricing method for equity-indexed annuities under uncertain volatility and stochastic interest rate.
The paper uses stochastic control to analyze interest rate markets with roll-over risk.
This paper focuses on the pricing of the variance swap in an incomplete market where the stochastic interest rate and the price of the stock are respectively driven by Cox-Ingersoll-Ross model and Heston model with simultaneous Lévy jumps. By using the equilibrium framework, we obtain the pricing kernel and the equival…
This is a follow up of our previous paper - Trybuła and Zawisza \cite{TryZaw}, where we considered a modification of a monotone mean-variance functional in continuous time in stochastic factor model. In this article we address the problem of optimizing the mentioned functional in a market with a stochastic interest rat…
In this paper we are interested in term structure models for pricing zero coupon bonds under rapidly oscillating stochastic volatility. We analyze solutions to the generalized Cox-Ingersoll-Ross two factors model describing clustering of interest rate volatilities. The main goal is to derive an asymptotic expansion of …
A variable annuity contract with Guaranteed Minimum Withdrawal Benefit (GMWB) promises to return the entire initial investment through cash withdrawals during the contract plus the remaining account balance at maturity, regardless of the portfolio performance. Under the optimal(dynamic) withdrawal strategy of a policyh…
This paper models short rates with jumps using PDEs.
The purpose of this paper is to study the generalized Fong--Vasicek two-factor interest rate model with stochastic volatility. In this model the dispersion of the stochastic short rate (square of volatility) is assumed to be stochastic as well and it follows a non-negative process with volatility proportional to the sq…
Enhanced Black-Scholes model for option pricing with stochastic volatility and interest rate variability.
Clarifies when solutions to stochastic PDEs stay near given subsets.
The study models mortgage prepayment risk using stochastic housing market activity.
It is well known that the Cox-Ingersoll-Ross (CIR) stochastic model to study the term structure of interest rates, as introduced in 1985, is inadequate for modelling the current market environment with negative short interest rates. Moreover, the diffusion term in the rate dynamics goes to zero when short rates are sma…
We present a path integral method to derive closed-form solutions for option prices in a stochastic volatility model. The method is explained in detail for the pricing of a plain vanilla option. The flexibility of our approach is demonstrated by extending the realm of closed-form option price formulas to the case where…
An empirical analysis of interest rates in money and capital markets is performed. We investigate a set of 34 different weekly interest rate time series during a time period of 16 years between 1982 and 1997. Our study is focused on the collective behavior of the stochastic fluctuations of these time-series which is in…
The paper analyzes GMWB annuities in low interest rate environments.
This paper analyzes the robust growth rate of leveraged ETFs under uncertain parameters.
Pricing and hedging exotic options using local stochastic volatility models drew a serious attention within the last decade, and nowadays became almost a standard approach to this problem. In this paper we show how this framework could be extended by adding to the model stochastic interest rates and correlated jumps in…