Risk Management in Times of Negative Interest Rates

In this paper we introduce the displaced historical simulation model which is designed to handle negative and close-to-zero risk factors. This is an issue of recent and major interest to the financial sector, both from a regulatory and financial institutions perspective, especially in light of observed negative values for major bond yield and interest rate … [Read more…]

Affine, or Non-affine, that is the question!

It exist strong consensus in the academic literature that if we want to describe the random behaviour of equity products, as e.g. the S&P 500 index, we need to understand two main structures: stochastic volatility and jumps. Our paper compares the performance of a┬álarge number of state of the art continuous-time models. The model specifications … [Read more…]