Antoon Pelsser

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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)
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 For the latter(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)
The last decennium a vast literature on stochastic mortality models has been developed. However, these models are often not directly applicable to insurance portfolios because: a) For insurers and pension funds it is more relevant to model mortality rates measured in insured amounts instead of measured in number of policies. b) Often there is not enough(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)
We compare single factor Markov-functional and multi factor market models for hedging performance of Bermudan swaptions. We show that hedging performance of both models is comparable, thereby supporting the claim that Bermudan swaptions can be adequately risk-managed with single factor models. Moreover, we show that the impact of smile can be much larger(More)
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)