Pricing caps with HJM models: the benefits of humped volatility

DOI10.1016/J.EJOR.2010.06.019MaRDI QIDQ613457zbMATH OpenOpenAlexFDO

Authors Jury Falini

Publication date 20 December 2010

Published in European Journal of Operational Research (Search for Journal in Brave)

Full work available at URL http://repec.deps.unisi.it/quaderni/563.pdf

zbMATH Keywords

Kalman filterfinanceinterest ratescap and floor pricinghumped volatility

Mathematics Subject Classification ID

Inference from stochastic processes and prediction (62M20) Statistical methods; risk measures (91G70) Interest rates, asset pricing, etc. (stochastic models) (91G30)

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Cites work

• A MULTIFACTOR GAUSS MARKOV IMPLEMENTATION OF HEATH, JARROW, AND MORTON
• A theory of the term structure of interest rates
• An analytically tractable interest rate model with humped volatility
• An equilibrium characterization of the term structure
• Bond Pricing and the Term Structure of Interest Rates: A New Methodology for Contingent Claims Valuation
• Classes of interest rate models under the HJM framework
• Finite dimensional affine realisations of HJM models in terms of forward rates and yields
• Forward rate dependent Markovian transformations of the Heath-Jarrow-Morton term structure model
• Interest rate option pricing with volatility humps
• LIBOR and swap market models and measures
• Pricing interest-rate-derivative securities
• The volatility structure of the fixed income market under the HJM framework: a nonlinear filtering approach
• VOLATILITY STRUCTURES OF FORWARD RATES AND THE DYNAMICS OF THE TERM STRUCTURE
• WHEN IS THE SHORT RATE MARKOVIAN?

Cited in

(10)

• Interest rate derivatives pricing with volatility smile
• An analytically tractable interest rate model with humped volatility
• Implications of implicit credit spread volatilities on interest rate modelling
• An approximation of caplet implied volatilities in Gaussian models
• Interest rate option pricing with volatility humps
• Pricing and risk management of interest rate swaps
• EQUILIBRIUM PRICE OF VARIANCE SWAPS UNDER STOCHASTIC VOLATILITY WITH LÉVY JUMPS AND STOCHASTIC INTEREST RATE
• Valuation of European crude oil options with co-jump diffusions and stochastic interest rate
• A noisy principal component analysis for forward rate curves
• A cyclical square-root model for the term structure of interest rates

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