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Stochastic Deflator for an Economic Scenario Generator with Five Factors

Abstract : In this paper, we implement a stochastic deflator with five economic and financial risk factors: interest rates, market price of risk, stock prices, default intensities, and convenience yields. We examine the deflator with different financial assets, such as stocks, zero‐coupon bonds, vanilla options, and corporate coupon bonds. We find required regularity conditions to implement our stochastic deflator. Our numerical results show the reliability of the deflator approach in pricing financial derivatives.
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https://hal.archives-ouvertes.fr/hal-01730072
Contributor : Po-Keng Cheng Connect in order to contact the contributor
Submitted on : Wednesday, February 6, 2019 - 11:23:53 PM
Last modification on : Wednesday, November 20, 2019 - 2:44:30 AM
Long-term archiving on: : Tuesday, May 7, 2019 - 3:01:10 PM

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  • HAL Id : hal-01730072, version 4
  • ARXIV : 1806.02991

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Po-Keng Cheng, Frédéric Planchet. Stochastic Deflator for an Economic Scenario Generator with Five Factors. 2019. ⟨hal-01730072v4⟩

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