In this paper we value a callable snowball floater, a complex interest rate instrument with variable coupon payments, which depend on the prevailing interest rates in arrears and recursively on previous coupon payments. The embedded option requires solving an optimal stopping problem using the...

We build a multi-factor, no-arbitrage model of the term structure of spot interest rates. The stochastic factors are the short-term interest rate and the premia of the futures rates over the short-term interest rates.(...)

We consider the demand for state contingent claims in the presence of a zero-mean, nonhedgeable background risk. An agent is defined to be generalized risk averse if he/she reacts to an increase in background risk by choosing a demand function for contingent claims with a smaller slope. We show...