We present a stochastic-volatility, short rate term structure model, which extends the classic multi-factor Hull-White model. This model is designed to fit the swaption implied volatility cube and to incorporate the two-curve modeling paradigm. The model exhibits non-Gaussian forward swap rates...

We discuss a general dynamic replication approach to counterparty credit risk modeling. This leads to a fundamental jump-process backward stochastic differential equation (BSDE) for the credit risk adjusted portfolio value. We then reduce the fundamental BSDE to a continuous BSDE. Depending on...

This is the first in a series of papers in which we study an efficient approximation scheme for solving the Hamilton-Jacobi-Bellman equation for multi-dimensional problems in stochastic control theory. The method is a combination of a WKB style asymptotic expansion of the value function, which...

We refine the analysis of hedging strategies for options under the SABR model. In particular, we provide a theoretical justification of the empirical observation that the modified delta (“Bartlett's delta”) introduced there provides a more accurate and robust hedging strategy than the...

In this Element the authors review the technique of the change of numeraire in the martingale approach to option pricing. Their intention is to present a reader friendly explanation of the technique itself, and illustrate how it is applied in various fields of quantitative finance as the basis...

In the past decades, genetic algorithms (GA), particle swarm optimization (PSO) algorithms, and BOX algorithms have been used in natural gas liquefaction process optimization. Since all three methods can find a solution for a given objective function but adopt different strategies and...