Stochastic Interest Rate Modeling with Fixed Income Derivative Pricing

10.1142/12000 ◽  
2021 ◽  
Author(s):  
Nicolas Privault
Keyword(s):  
Interest Rate ◽  
Derivative Pricing ◽  
Stochastic Interest Rate ◽  
Fixed Income ◽  
Stochastic Interest

PRICING VARIANCE SWAPS UNDER DOUBLE HESTON STOCHASTIC VOLATILITY MODEL WITH STOCHASTIC INTEREST RATE

2021 ◽  
pp. 1-17
Author(s):  
Huojun Wu ◽  
Zhaoli Jia ◽  
Shuquan Yang ◽  
Ce Liu
Keyword(s):  
Interest Rate ◽  
Closed Form ◽  
Stochastic Volatility ◽  
Stochastic Volatility Model ◽  
Characteristic Functions ◽  
Stochastic Interest Rate ◽  
Modeling Framework ◽  
Variance Swaps ◽  
Volatility Model ◽  
Stochastic Interest

In this paper, we discuss the problem of pricing discretely sampled variance swaps under a hybrid stochastic model. Our modeling framework is a combination with a double Heston stochastic volatility model and a Cox–Ingersoll–Ross stochastic interest rate process. Due to the application of the T-forward measure with the stochastic interest process, we can only obtain an efficient semi-closed form of pricing formula for variance swaps instead of a closed-form solution based on the derivation of characteristic functions. The practicality of this hybrid model is demonstrated by numerical simulations.

scholarly journals CVaR hedging under stochastic interest rate

2015 ◽  
Vol 1 ◽  
Author(s):  
Angela Tsao ◽  
Xiang Shi ◽  
Alexander Melnikov
Keyword(s):  
Interest Rate ◽  
Stochastic Interest Rate ◽  
Stochastic Interest
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