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Department seminar by Yang Lu, University of Paris 13Export this event to calendar

Friday, November 29, 2019 — 10:30 AM EST

Noncausal Affine Processes with Applications to Derivative Pricing


Linear factor models, where the factors are affine processes, play a key role in Finance, since they allow for quasi-closed form expressions of the term structure of risks. We introduce the class of noncausal affine linear factor models by considering factors that are affine in reverse time. These models are especially relevant for pricing sequences of speculative bubbles. We show that they feature much more complicated non affine dynamics in calendar time, while still providing (quasi) closed form term structures and derivative pricing formulas. The framework is illustrated with zero-coupon bond and European call option pricing examples.

Location 
M3 - Mathematics 3
Room: 3127
200 University Avenue West

Waterloo, ON N2L 3G1
Canada

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