7 papers
Consistent pricing of bivariate interest rate exotics via constrained Schrödinger optimal transport
Patrick Roome
We develop a modeling framework for pricing bivariate interest rate exotic derivatives that maintains consistency across three interconnected markets: CMS spread options and the tw…
No-arbitrage bounds for the forward smile given marginals
Sergey Badikov, Antoine Jacquier, Daphne Qing Liu +1
We explore the robust replication of forward-start straddles given quoted (Call and Put options) market data. One approach to this problem classically follows semi-infinite linear…
Black-Scholes in a CEV random environment
Antoine Jacquier, Patrick Roome
Classical (Itô diffusions) stochastic volatility models are not able to capture the steepness of small-maturity implied volatility smiles. Jumps, in particular exponential Lévy and…
Two examples of non strictly convex large deviations
Stefano De Marco, Antoine Jacquier, Patrick Roome
We present two examples of a large deviations principle where the rate function is not strictly convex. This is motivated by a model used in mathematical finance (the Heston model)…
Large-Maturity Regimes of the Heston Forward Smile
Antoine Jacquier, Patrick Roome
We provide a full characterisation of the large-maturity forward implied volatility smile in the Heston model. Although the leading decay is provided by a fairly classical large de…
The Small-Maturity Heston Forward Smile
Antoine Jacquier, Patrick Roome
In this paper we investigate the asymptotics of forward-start options and the forward implied volatility smile in the Heston model as the maturity approaches zero. We prove that th…