poster: POSTER SESSION: Control of price acceptability under the univariate Vasicek model.
speaker: Stephane Dang-Nguyenspeaker: Yves Rakontondratsimba
abstract: The valuation of the probability of a nancial contract to be lower or higher of a given price under the univariate Vasicek model is discussed in this paper. This price restriction can be justied by consistency reasons, since some prices may not be coherent on a nancial point of view, e.g. they imply negative yields, or thought as unreachable by the asset manager. At rst, assuming that the pricing functions is monotone, the price constraints are formulated in terms of a threshold on the value of the spot rate process. Since this process is Gaussian, these limits are reformulated in terms of a barrier of the Gaussian increments. Next, once the thresholds are identied, the probability to satisfy the price restriction after the generation of the spot rate at one future date can be computed. Then, assuming that the bounds on the spot rate are constant during a MonteCarlo simulation, the probability of generating a path of this process that does not satisfy the constraint is valued using some results related to the hitting times. Lastly, the proposed approach is applied to various interest rates sensitive contracts and is illustrated by some numerical examples.
timetable:
Thu 28 Jan, 14:00 - 15:00,
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