We present an approach for pricing of illiquid bonds (and bond derivatives) in an arbitrage-free way and consistently with observed prices of liquid bonds. The basic model is a multifactor term structure model with abstract latent factors. The approach is based on stochastic filtering techniques, leading to a continuous update of the distribution of the latent factors on the basis of the inform...

Any map of schemes X → Y defines an equivalence relation R = X ×Y X → X × X, the relation of ”being in the same fiber”. We have shown elsewhere that not every equivalence relation has this form, even if it is assumed to be finite. By contrast, we prove here that every toric equivalence relation on an affine toric variety does come from a morphism and that quotients by finite toric equivalence r...

Pursuing ideas of Jeff Smith, we develop a homotopy theory of ideals of monoids in a symmetric monoidal model category. This includes Smith ideals of structured ring spectra and of differential graded algebras. Such Smith ideals are NOT subobjects, and as a result the theory seems to require us to consider all Smith ideals of all monoids simultaneously, rather then restricting to the Smith idea...

Motivated by empirical observations, we assume that the inventory level of a company follows a mean reverting process. The objective of the management is to keep this inventory level as close as possible to a given target; there is a running cost associated with the difference between the actual inventory level and the target. If inventory deviates too much from the target, management may perfo...

If one writes with a pen grasped between the toes, or a pencil held in the mouth, the handwriting style may be of poor quality but can be identified as belonging to a particular individual. Like other actions, such as grasping or pointing, different body parts can be used to produce the movement. These findings, of reasonably consistent spatial and temporal productions by different effectors, h...

We consider the problem of stochastic control under constraints on the information structure. We review some old results from static team theory, where new simple proofs are given. The signalling phenomenon in distributed optimal linear quadratic Gaussian control plays a central role because of the complexity it implicates. Necessary and sufficient conditions for eliminating the signalling ince...

To meet the targets of the Kyoto Protocol, European Union has established the European Emission Trading Scheme, a mandatory market for carbon emission allowances. This regulatory framework has introduced a market for emission allowances and created a variety of emission-related financial instruments. In this work, we show that the economic mechanism of carbon allowance price formation can be fo...