There are several pricing and risk model applications where the assumption of a deterministic LIBOR-OIS basis can lead to severe mispricing. By modeling such a basis using a jump-diffusion process, we show how stochastic basis can impact the valuation of specific deals such as zero-coupon swaps,...

We extend the LIBOR market model to accommodate the new market practice of using different forward and discount curves in the pricing of interest-rate derivatives. Our extension is based on modeling the joint evolution of forward rates belonging to the OIS curve and corresponding spreads with...

We extend the LIBOR market model to accommodate the new market practice of using different forward and discount curves in the pricing of interest-rate derivatives. Our extension is based on modeling the joint evolution of forward rates belonging to the discount curve and corresponding spreads...

We develop an asymptotic expansion technique for pricing timer options under general stochastic volatility models around small volatility of variance. Closed-form approximation formulas have been obtained for the Heston model and the 3/2-model. The approximation has an easy-to-understand...

We extend the model presented in Bonollo et al. by introducing a multiscenario framework that allows for a richer and more realistic specification, including non-static (stochastic) probabilities of default and losses given default. Though more complex from a computational point of view, the...

We try and apply the single-scenario version of the general model in Castagna, Mercurio and Mosconi (2010) to the pricing of CDOs. We are able to establish a unified approach to both evaluate the Credit VaR and the risk of structured products, and thus evaluate on a consistent and uniform basis...