We develop a Gaussian stochastic string model that provides closed-form expressions for the prices of caps and swaptions that, under certain conditions, reduce to Black (1976) formulas. We also propose a stochastic string LIBOR market model that generalizes the models of Brace et al. (1997) and...

This paper addresses the economic impact of the carbon allowance market in the European Emission Trading Scheme (ETS) on the futures market of electricity, gas, and coal. Our findings seem to confirm that, as expected, electricity returns are positively affected by carbon allowances, coal, and...

This paper develops a new macro-financial continuous-time model for the term structure of interest rates assuming that the instantaneous interest rate converges to a certain long-term mean level that depends on the business cycle and that the interest rate volatility depends on the interest rate...