We introduce a novel multi-factor Heston-based stochastic volatility model, which is able to reproduce consistently typical multi-dimensional FX vanilla markets, while retaining the (semi)-analytical tractability typical of affine models and relying on a reasonable number of parameters. A...

We present a flexible approach for the valuation of interest rate derivatives based on Affine Processes. We extend the methodology proposed in Keller-Ressel et al. (2009) by changing the choice of the state space. We provide semi-closed-form solutions for the pricing of caps and floors. We then...

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...

We provide analytic pricing formulas for Fixed and Floating Range Accrual Notes within the multifactor Wishart affine framework which extends significantly the standard affine model. Using estimates for three short rate models, two of which are based on the Wishart process whilst the third one...

In this paper we measure the impact of variance and covariance risks in financial markets. In an asset allocation framework with stochastic (co)variances, we consider the possibility to invest not only in the risky assets but also in the variance swaps associated that are non redundant...

In this paper we develop a novel market model where asset variances-covariances evolve stochastically. In addition shocks on asset return dynamics are assumed to be linearly correlated with shocks driving the variance-covariance matrix.Analytical tractability is preserved since the model is...

In this paper we introduce a new criterion in order to measure the variance and covariance risks in financial markets. Unlike past literature, we quantify the (co)variance risk by comparing the spread between the initial wealths required to obtain the same final utility in an incomplete and...

In this paper, we present and discuss the estimation of the Wishart Affine Stochastic Correlation (WASC) model introduced in Da Fonseca et al. (2006) under the historical measure. We review the main estimation possibilities for this continuous time process and provide elements to show that the...

In this paper, we quantify the impact on the representative agent's welfare of the presence of derivative products spanning covariance risk. In an asset allocation framework with stochastic (co)variances, we allow the agent to invest not only in the stocks but also in the associated variance...