Pricing inflation products with stochastic volatility and stochastic interest rates

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      <subfield code="a">Pricing inflation products with stochastic volatility and stochastic interest rates</subfield>
      <subfield code="c">Stefan N. Singor...[]</subfield>
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      <subfield code="a">We consider a Heston type inflation model in combination with a HullWhite model for nominal and real interest rates, in which all the correlations can be non-zero. Due to the presence of the Heston dynamics our derived inflation model is able to capture the implied volatility skew/smile, which is present in the inflation option market data. We derive an efficient approximate semi-closed pricing formula for two types of inflation dependent options: index and year-on-year inflation options. The derived pricing formulas allow for an efficient calibration of the inflation model. We also illustrate our approach using a real-life pension fund example, where the Heston HullWhite model is used to determine the value of conditional future indexations.</subfield>
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      <subfield code="w">MAP20077100574</subfield>
      <subfield code="t">Insurance : mathematics and economics</subfield>
      <subfield code="d">Oxford : Elsevier, 1990-</subfield>
      <subfield code="x">0167-6687</subfield>
      <subfield code="g">04/03/2013 Volumen 52 Número 2 - marzo 2013 </subfield>
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      <subfield code="y">MÁS INFORMACIÓN</subfield>
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