In this paper, we propose a general methodology to analyse model risk for discount bond options within a unified Heath, Jarrow, Morton (1992) framework. We illustrate its applicability by focusing on the hedging of discount bond options and options portfolios. We show how to decompose the...

The last two decades have seen the development of a profusion of theoretical models of the term structure of interest rates. This study provides a general overview and a comprehensive comparative study of the most popular ones among both academics and practitioners. It also discusses their...

We analyze optimal investment strategies under the drawdown constraint that the wealth process never falls below a fixed fraction of its running maximum. We derive optimal allocation programs by solving numerically the Hamilton-Jacobi-Bellman equation that characterizes the finite horizon...