The price of a European option can be computed as the expected value of the payoff function under the risk-neutral measure. For American options and path-dependent options in general, this principle cannot be applied. In this paper, we derive a model-free analytical formula for the implied...

Implicit in interest rate derivatives are Arrow-Debreu prices (or state price densities, SPDs) that contain fundamental information for risk and portfolio management in interest rate markets. To extract such information from interest rate derivatives, we propose a non-parametric method to...

From interbank interest rate option prices, we obtain the implied market expectations for interest rates using a genetic algorithm and a multifactor term structure model. We further analyse how those expectations differ for a subset of options and futures, and whether those expectations...

This paper examines the forecast power of subsets of the option-implied interest rate derivatives’ expectations. We use a string market model with three factors to extract the implied risk-neutral volatility of the short-end interest rate term structure. Using data from the Brazil derivatives...

This paper discusses the Credit Derivatives Market perspectives in Brazil based on an empirical research aimed to evaluate the ability of financial market agents to deal with these instruments. The difficulties found by regulators and banking institutions to promote operations with Credit...