This paper deals with the numerical approximation of the class of Markovian backward stochastic differential equations (BSDEs) where the terminal condition is a functional of Brownian motion. By developing the solution of a Markovian BSDE as a Fourier-Hermite expansions in a Hilbert space, we...

This technical note gives implementation notes for estimating the Koijen-Nijman-Werker model from historical data based on a Kalman filter. We provide an independent derivation of the KNW model. We propose a different implementation of the state-space formulation of the KNW model and we test the...

Traditional ALM first sets the policy parameters and then assesses the impact on some sub-set of risk and return measures. We propose a method to ‘invert' the traditional ALM approach: first formulate the desired level of risk and return measures and then systematically search through the...

This paper defines an approximation to the value of funding ratio put options for pension funds. This option is, by construction, the ideal option to hedge the risk of a funding ratio falling below some required minimum level. It's value can be used for several applications, for example as a...

In this paper we empirically analyze and compare the Libor and Swap Market Models, developed by Brace, Gatarek and Musiela (1997) and Jamshidian (1997), using paneldata on prices of US caplets and swaptions. A Libor Market Model can directly be calibrated to observed prices of caplets, whereas a...

We develop a dual-control method for approximating investment strategies in incomplete environments that emerge from the presence of trading constraints. Convex duality enables the approximate technology to generate lower and upper bounds on the optimal value function. The mechanism rests on...

We derive general pricing formulas for Rate of Return Guarantees in Regular Premium Unit Linked Insurance under stochastic interest rates. Our main contribution focusses on the effect of stochastic interest rates. First, we show the effect of stochastic interest rates can be interpreted as, what...

Using daily caps and floors market prices throughout the years 1993 and 1994, we address the open question whether spot or forward interest-rate models of the term structure provide a better fit to market prices of options. In particular, we compare the Hull and White (1994), Pelsser (1996) and...

In this article we provide a valuation formula for a quanto swaption, the interest rate equivalent of the well known equity spread option. A quanto swaption gives the owner of the option the right to enter into a quanto swap in which he has to make payments in the domestic currency determined by...

Using daily caps and floors market prices throughout the years 1993 and 1994, we address the open question whether spot or forward interest-rate models of the term structure provide a better fit to market prices of options. In particular, we compare the Hull and White (1994), Pelsser (1996) and...