The Samp;P 500 index return interacts negatively with its volatility. This paper traces the negative interaction to three distinct economic channels and proposes to disentangle the relative contribution of each channel using Samp;P 500 index options. First, equity volatility increases...

The SABR closed-form formula (Hagan et. al 2002) is the standard for smile-consistent pricing in the swaption market. Here we address the issue of turning SABR assumptions into a consistent and arbitrage-free term structure model in the BGM/Libor Market Model framework. We compute the joint...

A number of articles in financial economics have used quarterly or semi-annual mutual fund holdings data to test hypotheses about investment manager behavior. This article reexamines four well-known hypotheses in finance to determine whether the results of prior tests of these hypotheses remain...

We introduce a new forward CPI model that is based on a multi-factor volatility structure and leads to SABR-like dynamics for forward inflation rates. Our approach is the first in the financial literature to reconcile zero-coupon and year-on-year quotes, granting, at the same time, a both fast...

Itô calculus deals with functions of the current state whilst we deal with functions of the current path to acknowledge the fact that often the impact of randomness is cumulative. We express the differential of the functional in terms of adequately defined partial derivatives to obtain an Itô...

We extend the model presented in Bonollo et al. by introducing a multiscenario framework that allows for a richer and more realistic specification, including non-static (stochastic) probabilities of default and losses given default. Though more complex from a computational point of view, the...