LIBOR MARKET MODEL UNDER THE REAL-WORLD MEASURE

2013 ◽  
Vol 16 (04) ◽  
pp. 1350024 ◽  
Author(s):  
TAKASHI YASUOKA
Keyword(s):  
Real World ◽  
Market Price ◽  
Market Model ◽  
Market Price Of Risk ◽  
The Real ◽  
Libor Market Model ◽  
State Price ◽  
Number Of Factors ◽  
Price Of Risk ◽  
State Price Deflator

This paper consists of two parts. The first part aims to construct a LIBOR market model under the real-world measure (LMRW) according to the Jamshidian framework. Then, LIBOR rates, bond prices and a state price deflator are explicitly described under the LMRW. The second part aims to estimate the market price of risk, as well as to investigate the fundamental properties of real-world simulations. Then, the following subjects are theoretically investigated: (1) a method for determining the number of factors for real-world simulations, (2) the properties of real-world simulations, and (3) the value of the market price of risk in connection with sample data. Numerical examples demonstrate our results.

scholarly journals Interest rate model with humped volatility under the real-world measure

2018 ◽  
Vol 7 (1) ◽  
Author(s):  
Takashi Yasuoka
Keyword(s):  
Interest Rate ◽  
Term Structure ◽  
Real World ◽  
Model Comparison ◽  
Market Price ◽  
Yield Data ◽  
Market Price Of Risk ◽  
The Real ◽  
Volatility Model ◽  
Price Of Risk

The purpose of this paper is to develop real-world modeling for interest rate volatility with a humped term structure. We consider humped volatility that can be parametrically characterized such that the Hull–White model is a special case. First, we analytically show estimation of the market price of risk with humped volatility. Then, using U.S. treasury yield data, we examine volatility fitting and estimate the market price of risk using the Heath–Jarrow–Morton model, Hull–White model, and humped volatility model. Comparison of the numerical results shows that the real-world humped volatility model is adequately developed.

scholarly journals Implicit incentives for fund managers with partial information

2021 ◽  
Author(s):  
Flavio Angelini ◽  
Katia Colaneri ◽  
Stefano Herzel ◽  
Marco Nicolosi
Keyword(s):  
Asset Allocation ◽  
Partial Information ◽  
Market Price ◽  
Investment Strategy ◽  
Expected Returns ◽  
Martingale Method ◽  
Fund Manager ◽  
Market Price Of Risk ◽  
Fund Managers ◽  
Price Of Risk

AbstractWe study the optimal asset allocation problem for a fund manager whose compensation depends on the performance of her portfolio with respect to a benchmark. The objective of the manager is to maximise the expected utility of her final wealth. The manager observes the prices but not the values of the market price of risk that drives the expected returns. Estimates of the market price of risk get more precise as more observations are available. We formulate the problem as an optimization under partial information. The particular structure of the incentives makes the objective function not concave. Therefore, we solve the problem by combining the martingale method and a concavification procedure and we obtain the optimal wealth and the investment strategy. A numerical example shows the effect of learning on the optimal strategy.

scholarly journals Optimization of Classification Track Assignment Considering Block Sequence at Train Marshaling Yard

2018 ◽  
Vol 2018 ◽  
pp. 1-11
Author(s):  
Yingqun Zhang ◽  
Rui Song ◽  
Shiwei He ◽  
Haodong Li ◽  
Xiaole Guo
Keyword(s):  
Integer Programming ◽  
Numerical Experiment ◽  
Real World ◽  
Programming Model ◽  
Block Sequence ◽  
Operational Process ◽  
Integer Programming Model ◽  
The Real ◽  
Reasonable Amount ◽  
Number Of Factors

An operational process at train marshaling yard is considered in this study. The inbound trains are decoupled and disassembled into individual railcars, which are then moved to a series of classification tracks, forming outbound trains after being assembled and coupled. We focus on the allocation plan of the classification tracks. Given are the disassembling and assembling sequence, the railcars connection plan, and a number of classification tracks. Output is the assignment of the railcars to the classification tracks. An integer programming model is proposed, aimed at reducing the number of coupling operations, as well as the number of dirty tracks which is related to the rehumping operation, and the order of the railcars on the outbound train must satisfy the block sequence. Tabu algorithm is designed to solve the problem, and the model is also tested by CPLEX in comparison. A numerical experiment based on a real-world case is analyzed, and the result can be reached within a reasonable amount of time. We also discussed a number of factors that may affect the track assignment and gave suggestions for the real-world case.

A colonial take on island life

2012 ◽  
Vol 2 (2) ◽  
pp. 150-157 ◽  
Author(s):  
Phil McDermott
Keyword(s):  
Economic Geography ◽  
Real World ◽  
Academic Resilience ◽  
Market Model ◽  
New Economic Geography ◽  
The Real

Peck’s (2012) reaction to the colonizing impulse of economics is a call to consolidation of economic geography, better connecting diverse sites of inquiry. This appears to be a reaction to the current incursion of orthodoxy in the form of the New Economic Geography into the domain of the old economic geography. This incursion carries with it the ideological eminence of the market which oversimplifies the nature of exchange and consequently obscures the processes which shape places. I question Peck’s proposition. From an applied perspective our understanding of the real world benefits from the heterogeneity of economic geography. Academic resilience comes from diversity. As a result, economic geography already provides a strong and grounded basis for resisting the monotheism of orthodox economics. (I also question the use of the island life analogy as a didactic device in a critique of a similar device, the neoclassical market model.)

Multidimensional Models: Martingale Approach

2019 ◽  
pp. 191-201
Author(s):  
Tomas Björk
Keyword(s):  
Market Price ◽  
Representation Formula ◽  
Explicit Representation ◽  
Martingale Measure ◽  
Market Price Of Risk ◽  
Martingale Approach ◽  
Price Of Risk ◽  
Equivalent Martingale ◽  
Absence Of Arbitrage ◽  
Multidimensional Models

In this chapter we study a very general multidimensional Wiener-driven model using the martingale approach. Using the Girsanov Theorem we derive the martingale equation which is used to find an equivalent martingale measure. We provide conditions for absence of arbitrage and completeness of the model, and we discuss hedging and pricing. For Markovian models we derive the relevant pricing PDE and we also provide an explicit representation formula for the stochastic discount factor. We discuss the relation between the market price of risk and the Girsanov kernel and finally we derive the Hansen–Jagannathan bounds for the Sharpe ratio.

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