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Short Summary

• Propose a framework that models forward-looking and backward-looking term rates simultaneously with a single SDE.
• This is achieved by
  • extending standard definition of zero-coupon bonds $P(t,T) \ (t \le T)$ to times $t > T$,
  • introducing an extended $T$-forward measure associated with the extended zero-coupon bonds.

Link to Paper

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3330240

Authors

Andrei Lyashenko and Fabio Mercurio

Submission Date (yyyy/MM/dd)

2019/03/05

Short Summary

Introduce SABR model that captures dynamics of volatility smiles.

Link to Paper

http://web.math.ku.dk/~rolf/SABR.pdf

Authors, Affiliation

Patrick S. Hagan, Deep Kumar, Andrew S. Lesniewski, and Diana E. Woodward

Submission Date (yyyy/MM/dd)

2002/07/26

Short Summary

Introduce methods for discretizing lognormal forward Libor model and swap rate models that preclude arbitrage among bonds keep interest rates positive even after discretization.

Link to Paper

https://www.maths.univ-evry.fr/pages_perso/crepey/Taux/glasserman1.pdf

Authors

Paul Glasserman, Xiaoliang Zhao

Submission Date (yyyy/MM/dd)

2000/Jan

Short Summary

• Propose a multi-currency model with FX volatility skew, with a particular emphasis on model calibration to FX options across different maturities and strikes.

• This paper models

  • one-factor FX dynamics,
  • one-factor HW domestic short rate dynamics,
  • one-factor HW foreign short rate dynamics.

• A fast and robust calibration is realized by

  • approximating an exact forward FX dynamics to a markovian dynamics that exactly reproduces FX European option prices in the original model,
  • decompose approximately a local volatility $g(t, F(t, T))$ of the approximated FX dynamics above into a time-constant term $\bar{g}(F(t,T))$ and a time-dependent term $\sigma(t)$.

Link to Paper

https://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=73196

Authors, Affiliation

Vladimir Piterbarg

Submission Date (yyyy/MM/dd)

2005/2/7

Short Summary

Propose Markov Functional Model

Link to Paper

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=49240

Authors, Affiliation

Phil Hunt, Joanne Kennedy, Antoon Pelsser

Submission Date (yyyy/MM/dd)

1998/01/12

Comment (if any)

Pelsser's text book is also a good reference for MFM.

Short Summary

Propose a numerical method called Least Squares Monte Carlo to value American Options

Link to Paper

https://people.math.ethz.ch/~hjfurrer/teaching/LongstaffSchwartzAmericanOptionsLeastSquareMonteCarlo.pdf

Authors

Francis A. Longstaff, Eduardo S. Schwartz

Submission Date (yyyy/MM/dd)

2001

Comment

A lecture note includes a good introduction to LSMC.

Short Summary

Comparing two types of time discretization methods in monte carlo pricing.

Link to Paper

https://frouah.com/finance%20notes/Euler%20and%20Milstein%20Discretization.pdf

Authors, Affiliation

Fabrice Douglas Rouah

Short Summary

Describe how to construct multi curves both with and without collateral

Link to Paper

http://www.cirje.e.u-tokyo.ac.jp/research/dp/2009/2009cf630.pdf

Authors, Affiliation

Masaaki Fujii, Yasufumi Shimada, Akihiko Takahashi

Submission Date (yyyy/MM/dd)

2010/1/25

Short Summary

Propose a natural extension of the SABR model to price backward and forward-looking RFR caplets in a post-LIBOR world

Link to Paper

https://arxiv.org/pdf/2004.04501.pdf

Authors, Affiliation

Sander Willems

Submission Date (yyyy/MM/dd)

2020/5/6