Antoon Pelsser

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Geometric optimization algorithms are developed that efficiently find the nearest low-rank correlation matrix. We show numerically that our methods outperform the existing methods in the literature. The algorithm is shown theoretically to be globally convergent to a local minimum, with a quadratic local rate of convergence. The connection with the Lagrange(More)
In this paper we empirically compare different term structure models when it comes to the pricing and hedging of caps and swaptions. We analyze the influence of the number of factors on the pricing and hedging results, and investigate which type of data !interest rate data or derivative price data! should be used to estimate the model parameters to obtain(More)
The last decennium a vast literature on stochastic mortality models has been developed. All well known models have nice features but also disadvantages. In this paper a stochastic mortality model is proposed that aims at combining the nice features from existing models, while eliminating the disadvantages. More specifically, the model fits historical data(More)
This paper considers the pricing of European Asian options in the Black-Scholes framework. All approaches we consider are readily extendable to the case of an Asian basket option. We consider three methods for evaluating the price of an Asian option, and contribute to all three. Firstly, we show the link between the approaches of Rogers and Shi [1995],(More)
Cap and swaption prices contain information on interest rate volatilities and correlations. In this paper, we examine whether this information in cap and swaption prices is consistent with realized movements of the interest rate term structure. To extract an option-implied interest rate covariance matrix from cap and swaption prices, we use Libor market(More)
This paper shows that the forward rates process discretized by a single time step together with a separability assumption on the volatility function allows for representation by a low-dimensional Markov process. This in turn leads to efficient pricing by for example finite differences. We then develop a discretization based on the Brownian bridge especially(More)
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 Swap Market Model is calibrated to a certain set of swaption(More)