2 papers
q-fin.MF2024
Interest rate derivatives in a CTMC setting: pricing, replication and Ross recovery
Tim Leung, Matthew Lorig
We consider a financial market in which the short rate is modeled by a continuous time Markov chain (CTMC) with a finite state space. In this setting, we show how to price any fina…
q-fin.MF2024
Optimal positioning in derivative securities in incomplete markets
Tim Leung, Matthew Lorig, Yoshihiro Shirai
This paper analyzes a problem of optimal static hedging using derivatives in incomplete markets. The investor is assumed to have a risk exposure to two underlying assets. The hedgi…