A locally-built, LLM-digested index of recent arXiv papers in quant finance, geometry/topology, and statistical ML — keyword search served straight from SQLite on this machine.
Developed unbiased estimators for Heston model with stochastic interest rates.
Study proposes optimal risk-aware interest rates for crypto lending protocols.
Enhances valuation of variable annuities with stochastic interest rate models.
In this survey paper we discuss recent advances on short interest rate models which can be formulated in terms of a stochastic differential equation for the instantaneous interest rate (also called short rate) or a system of such equations in case the short rate is assumed to depend also on other stochastic factors. Ou…
It is well known that the Cox-Ingersoll-Ross (CIR) stochastic model to study the term structure of interest rates, as introduced in 1985, is inadequate for modelling the current market environment with negative short interest rates. Moreover, the diffusion term in the rate dynamics goes to zero when short rates are sma…
We introduce a tractable multi-currency model with stochastic volatility and correlated stochastic interest rates that takes into account the smile in the FX market and the evolution of yield curves. The pricing of vanilla options on FX rates can be performed effciently through the FFT methodology thanks to the affinit…
Quantum computing speeds up interest rate derivative pricing using LMM.
The paper analyzes insurance risks using stochastic models.
This paper modifies the Ait-Sahalia model to better describe interest rate behaviors.
The present study deals with the analysis and mapping of Swiss franc interest rates. Interest rates depend on time and maturity, defining term structure of the interest rate curves (IRC). In the present study IRC are considered in a two-dimensional feature space - time and maturity. Geostatistical models and machine le…
The currency carry trade is the investment strategy that involves selling low interest rate currencies in order to purchase higher interest rate currencies, thus profiting from the interest rate differentials. This is a well known financial puzzle to explain, since assuming foreign exchange risk is uninhibited and the …
The paper models stochastic interest rates for life insurance using phase-type distributions.
Develops a bi-variate stochastic framework to model mortality and interest rates with long-range dependence.
We investigate LIBOR-based derivatives using a parsimonious field theory interest rate model capable of instilling imperfect correlation between different maturities. Delta and Gamma hedge parameters are derived for LIBOR Caps against fluctuations in underlying forward rates. An empirical illustration of our methodolog…
Derives equations for life insurance reserves with interest rate uncertainty.
Models which postulate lognormal dynamics for interest rates which are compounded according to market conventions, such as forward LIBOR or forward swap rates, can be constructed initially in a discrete tenor framework. Interpolating interest rates between maturities in the discrete tenor structure is equivalent to ext…
This article is an extension of the work of one of us (Coopersmith, 2011) in deriving the relationship between certain interest rates and the inflation rate of a two component economic system. We use the well-known Fisher relation between the difference of the nominal interest rate and its inflation adjusted value to e…
Proposes a new model to handle negative interest rates using CIR framework.
The class of affine LIBOR models is appealing since it satisfies three central requirements of interest rate modeling. It is arbitrage-free, interest rates are nonnegative and caplet and swaption prices can be calculated analytically. In order to guarantee nonnegative interest rates affine LIBOR models are driven by no…
The paper studies multi-curve interest rate models and their consistency and finite-dimensional realizations.
There are more than eight hundred interest rates published in China bond market every day. Which are the benchmark interest rates that have broad influences on most interest rates is a major concern for economists. In this paper, multi-variable Granger causality test is developed and applied to construct a directed net…
This paper examines interest rates and market efficiency in DeFi loanable funds protocols.
Defines a new short rate model and convexity adjustment formulae.
A term structure model in which the short rate is zero is developed as a candidate for a theory of cryptocurrency interest rates. The price processes of crypto discount bonds are worked out, along with expressions for the instantaneous forward rates and the prices of interest-rate derivatives. The model admits function…
The study proposes a new interest rate model that captures long-term periodicity in U.S. Treasury yields.
Study pricing of American put options with stochastic interest rate and finite maturity.
Study on interest rate model with jumps, proving strong convergence in simulations.
Unified model for financial derivatives pricing with stochastic interest rates.
Paper provides an explicit formula for local volatility in Cheyette models.
Model analyzes debt recycling strategies under various fiscal regimes and jurisdictions.
Study proves convergence of interest rate model approximations.
By employing the technique of enlargement of filtrations, we demonstrate how to incorporate information about the future trend of the stochastic interest rate process into a financial model. By modeling the interest rate as an affine diffusion process, we obtain explicit formulas for the additional expected logarithmic…
Proposes new Monte Carlo methods for calibrating local volatility models with stochastic components.
Improved LV model for interest rate swaptions and caplets.
The interest rates (or nominal yields) can be negative, this is an unavoidable fact which has already been visible during the Great Depression (1929-39). Nowadays we can find negative rates easily by e.g. auditing. Several theoretical and practical ideas how to model and eventually overcome empirical negative rates can…
This paper offers a new class of models of the term structure of interest rates. We allow each instantaneous forward rate to be driven by a different stochastic shock, constrained in such a way as to keep the forward rate curve continuous. We term the process followed by the shocks to the forward curve ``stochastic str…
Proposes a new model for negative interest rates that fits market data closely.
The paper models SOFR and EFFR dynamics, reconciling diffusive and piecewise paths.
This paper models short rates with jumps using PDEs.
New inflation model captures correlations and skew in interest rates.
Optimal dividend strategy in dual risk model is well studied in the literatures. But to the best of our knowledge, all the previous works assumes deterministic interest rate. In this paper, we study the optimal dividends strategy in dual risk model, under a stochastic interest rate, assuming the discounting factor foll…
We determine an explicit formula for the Laplace transform of the price of an option on a maximal interest rate when the instantaneous rate satisfies Cox-Ingersoll-Ross's model. This generalizes considerably one result of Leblanc-Scaillet.
The paper uses a Hamiltonian method to price barrier options under Vasicek interest rate model.
For environmental problems such as global warming future costs must be balanced against present costs. This is traditionally done using an exponential function with a constant discount rate, which reduces the present value of future costs. The result is highly sensitive to the choice of discount rate and has generated …
We derive explicit valuation formulae for an exotic path-dependent interest rate derivative, namely an option on the composition of LIBOR rates. The formulae are based on Fourier transform methods for option pricing. We consider two models for the evolution of interest rates: an HJM-type forward rate model and a LIBOR-…
The potential approach is a general and simple method for modelling interest rates, foreign exchange rates, and in principle other types of financial assets. This paper takes data on some liquid interest rate derivatives, and fits potential models using a small finite-state Markov chain as the base Markov process.
Method calibrates stock price models with stochastic interest rates using optimal transport.
New model for options pricing accounting for time-varying interest rates, volatility, and equity premium.