We develop a multi-factor stochastic volatility Libor model with displacement, where each individual forward Libor is driven by its own square-root stochastic volatility process. The main advantage of this approach is that, maturity-wise, each square-root process can be calibrated to the corresponding cap(let)vola-strike panel at the market. However, since even after freezing the Libors in the ...

We deene and study a high-level language for describing actions that extends the language A introduced by Gelfond and Lifschitz. The new language, AR 0 , allows us to describe actions with indirect eeects (ramiications) and simple forms of nondeterminism. A translation from AR 0 into a formalism based on cir-cumscription is proved to be sound and complete .

The Cox-Ingersoll-Ross (CIR) interest rate model is used to model interest rates and interest rate derivatives. We study the term structure equation for single-factor models that predict non-negative interest rates. It is shown using finite difference techniques that if the boundary is attainable, then this boundary behaviour serves as a boundary condition and guarantees a uniqueness of solutio...

We revisit affine diffusion processes on general and on the canonical state space in particular. A detailed study of theoretic and applied aspects of this class of Markov processes is given. In particular, we derive admissibility conditions and provide a full proof of existence and uniqueness through stochastic invariance of the canonical state space. Existence of exponential moments and the fu...

As the annuity market in China develops, the Chinese insurance industry is increasingly exposed to longevity risk. A large part of the risk is ‘trend risk’, which cannot be diversified by pooling, but may be transferred to capital markets through derivatives that are written on a certain mortality index. In this paper, we first explore different methods to create a standardized mortality index ...

In this paper we study American put options on zero-coupon bonds under the CIR model of short interest rates. The uniqueness of the optimal exercise boundary and the solution existence and uniqueness of a degenerate parabolic free boundary problem are established. Numerical examples are also presented to confirm theoretical results.

Inclusion in Education’, IDS Bulletin, 34, 1 (2003), 1–8, and Y. Sayed, R. Subrahmanian, C. Soudien, S. Balagopalan and N. Carrim, Education Exclusion and Inclusion: Policy and Implementation in India and South Africa (London, forthcoming). In writing this article I am heavily indebted to my colleagues on this project, Sayed, Subrahmanian, Balagopalan and Carrim. The interpretation I generate h...

In the light of regime switching and volatility clustering in the dynamics of SHIBOR, regime-switching CIR model (RSCIR) and regime-switching GARCH CIR model (RSCIR-GARCH) are established by introducing regime-switching and GARCH specifications into CIR model successively. Then, a contrast study among CIR, RSCIR and RSCIR-GARCH models is performed based on SHIBOR sample data, which indicates th...

The four-card selection task (Wason, 1966) has been one of the most well-known tasks used in the literature on human reasoning. This article aimed to analyze this selection task by item response theory (Lord & Novick, 1968). Japanese undergraduates (N = 327 and 277 in Studies 1 and 2, respectively) responded to up to 10 types of representative Wason selection tasks, including the indicative tas...

This paper proposes an approach to the intraday analysis of the dynamics of electricity prices. The growth optimal portfolio (GOP) is used as a reference unit in a continuous financial electricity price model. A diversified global portfolio in the form a market capitalisation weighted index approximates the GOP. The GOP, measured in units of electricity, is normalised and then modelled as a tim...