Affine Processes on Positive Semidefinite Matrices

57 Pages Posted: 4 Oct 2009 Last revised: 8 Mar 2011

See all articles by Christa Cuchiero

Christa Cuchiero

Independent

Damir Filipović

Ecole Polytechnique Fédérale de Lausanne; Swiss Finance Institute

Eberhard Mayerhofer

University of Limerick - Department of Mathematics and Statistics

Josef Teichmann

Vienna University of Technology

Date Written: September 30, 2009

Abstract

This paper provides the mathematical foundation for stochastically continuous affine processes on the cone of positive semidefinite symmetric matrices. These matrix-valued affine processes have arisen from a large and growing range of useful applications in finance, including multi-asset option pricing with stochastic volatility and correlation structures, and fixed-income models with stochastically correlated risk factors and default intensities.

Keywords: affine process, stochastic correlation, term structure

JEL Classification: C60, G12, G13

Suggested Citation

Cuchiero, Christa and Filipovic, Damir and Mayerhofer, Eberhard and Teichmann, Josef, Affine Processes on Positive Semidefinite Matrices (September 30, 2009). Available at SSRN: https://ssrn.com/abstract=1481151 or http://dx.doi.org/10.2139/ssrn.1481151

Christa Cuchiero

Independent ( email )

No Address Available

Damir Filipovic (Contact Author)

Ecole Polytechnique Fédérale de Lausanne ( email )

Odyssea
Station 5
Lausanne, 1015
Switzerland

HOME PAGE: http://people.epfl.ch/damir.filipovic

Swiss Finance Institute

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

Eberhard Mayerhofer

University of Limerick - Department of Mathematics and Statistics ( email )

Castletroy, Co
Limerick
Ireland

Josef Teichmann

Vienna University of Technology ( email )

Department of Financial and Actuarial Mathematics
Wien
Austria
+43-1-58801, x10514 (Phone)
+43-1-58801, x10599 (Fax)

HOME PAGE: http://www.fam.tuwien.ac.at/~jteichma/

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