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.
The paper studies multi-curve interest rate models and their consistency and finite-dimensional realizations.
This paper uses crypto derivatives data to estimate yield curves for cryptocurrencies.
The crisis that affected financial markets in the last years leaded market practitioners to revise well known basic concepts like the ones of discount factors and forward rates. A single yield curve is not sufficient any longer to describe the market of interest rate products. On the other hand, using different yield c…
Nelson and Siegel curves are widely used to fit the observed term structure of interest rates in a particular date. By the other hand, several interest rate models have been developed such their initial forward rate curve can be adjusted to any observed data, as the Ho-Lee and the Hull and White one factor models. In t…
We revisit the problem of pricing and hedging plain vanilla single-currency interest rate derivatives using multiple distinct yield curves for market coherent estimation of discount factors and forward rates with different underlying rate tenors. Within such double-curve-single-currency framework, adopted by the market…
In fixed income sector, the yield curve is probably the most observed indicator by the market for trading and fifinancing purposes. A yield curve plots interest rates across different contract maturities from short end to as long as 30 years. For each currency, the corresponding curve shows the relation between the lev…
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…
We present a family of models for the term structure of interest rates which describe the interest rate curve as a stochastic process in a Hilbert space. We start by decomposing the deformations of the term structure into the variations of the short rate, the long rate and the fluctuations of the curve around its avera…
By adopting the polynomial interpolation method, we propose an approach to hedge against the interest-rate risk of the default-free bonds by measuring the nonparallel movement of the yield-curve, such as the translation, the rotation and the twist. The empirical analysis shows that our hedging strategies are comparable…
A robust machine learning approach forecasts U.S. Treasury yields, reducing risk for investors.
In this paper we develop a framework for discretely compounding interest rates which is based on the forward price process approach. This approach has a number of advantages, in particular in the current market environment. Compared to the classical as well as the Lévy Libor market model, it allows in a natural way for…
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…
We present a quantitative study of the markets and models evolution across the credit crunch crisis. In particular, we focus on the fixed income market and we analyze the most relevant empirical evidences regarding the divergences between Libor and OIS rates, the explosion of Basis Swaps spreads, and the diffusion of c…
We present a detailed analysis of interest rate derivatives valuation under credit risk and collateral modeling. We show how the credit and collateral extended valuation framework in Pallavicini et al (2011), and the related collateralized valuation measure, can be helpful in defining the key market rates underlying th…
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…
For a long time interest-rate models were built on a single yield curve used both for discounting and forwarding. However, the crisis that has affected financial markets in the last years led market players to revise this assumption and accommodate basis-swap spreads, whose remarkable widening can no longer be neglecte…
Model interest rates and energy futures with regime-switching dynamics.
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…
Italian banks use swaps to hedge against rising interest rates, offsetting losses on debt securities.
Study optimizes dividend payout strategies under fluctuating interest rates.
Genetic Algorithm improves Nelson-Siegel-Svensson model calibration for interest rates.
Study analyzes correlation structure in two-factor Hull-White model for XVA calculations.
This paper tests yield curve generators for property-casualty insurers.
Principal Component Analysis (PCA) is the most common nonparametric method for estimating the volatility structure of Gaussian interest rate models. One major difficulty in the estimation of these models is the fact that forward rate curves are not directly observable from the market so that non-trivial observational e…
Derives equations for life insurance reserves with interest rate uncertainty.
The term structure of interest rates or yield curve is a function relating the interest rate with its own term. Nonlinear regression models of Nelson-Siegel and Svensson were used to estimate the yield curve using a sample of historical data supplied by the National Stock Exchange of Costa Rica. The optimization proble…
We propose a formulation of the term structure of interest rates in which the forward curve is seen as the deformation of a string. We derive the general condition that the partial differential equations governing the motion of such string must obey in order to account for the condition of absence of arbitrage opportun…
Clarifies when solutions to stochastic PDEs stay near given subsets.
We present an arbitrage-free non-parametric yield curve prediction model which takes the full (discretized) yield curve as state variable. We believe that absence of arbitrage is an important model feature in case of highly correlated data, as it is the case for interest rates. Furthermore, the model structure allows t…
Empirical study on long-term discount rates using historical bond prices.
Develops a new model to better predict corporate bond yields.
Proposes a bond portfolio solution for managing interest rate risk.
Proposes a new model to handle negative interest rates using CIR framework.
We introduce a multiple curve framework that combines tractable dynamics and semi-analytic pricing formulas with positive interest rates and basis spreads. Negatives rates and positive spreads can also be accommodated in this framework. The dynamics of OIS and LIBOR rates are specified following the methodology of the …
The paper studies estimation of parameters of diffusion market models from historical data. The standard definition of implied volatility for these models presents its value as an implicit function of several parameters, including the risk-free interest rate. In reality, the risk free interest rate is unknown and need …
Investors choose between bonds and savings accounts based on utility maximization.
The space of probability distributions on a given sample space possesses natural geometric properties. For example, in the case of a smooth parametric family of probability distributions on the real line, the parameter space has a Riemannian structure induced by the embedding of the family into the Hilbert space of squ…
We consider a model for interest rates, where the short rate is given by a time-homogenous, one-dimensional affine process in the sense of Duffie, Filipovic and Schachermayer. We show that in such a model yield curves can only be normal, inverse or humped (i.e. endowed with a single local maximum). Each case can be cha…
This study models Burundi's bond market yield curve using Nelson-Siegel and Svensson models.
We derive an equation of motion for interest-rate yield curves by applying a minimum Fisher information variational approach to the implied probability density. By construction, solutions to the equation of motion recover observed bond prices. More significantly, the form of the resulting equation explains the success …
Unified framework matches equity and bond yields.
We study the role of co-jumps in the interest rate futures markets. To disentangle continuous part of quadratic covariation from co-jumps, we localize the co-jumps precisely through wavelet coefficients and identify statistically significant ones. Using high frequency data about U.S. and European yield curves we quanti…
We give a detailed account of correlations between credit sector/quality and treasury curve factors, using the robust framework of the Barclays POINT Global Risk Model. Consistent with earlier studies, we find a strong negative correlation between sector spreads and rate shifts. However, we also observe that the correl…
The study proposes a new interest rate model that captures long-term periodicity in U.S. Treasury yields.
New method prices interest rate derivatives without Monte Carlo, achieving high accuracy and speed.
We present a framework on how to hedge the interest rate sensitivity of liabilities discounted by an extrapolated yield curve. The framework is based on functional analysis in that we consider the extrapolated yield curve as a functional of an observed yield curve and use its Gâteaux variation to understand the sensiti…
In this article we revisit the definition of Precision-Recall (PR) curves for generative models proposed by Sajjadi et al. (arXiv:1806.00035). Rather than providing a scalar for generative quality, PR curves distinguish mode-collapse (poor recall) and bad quality (poor precision). We first generalize their formulation …
The financial crisis of 2007/08 caused catastrophic consequences and brought a bunch of changes around the world. Interest rates that were known to follow or behave similarly of each other diverged. Furthermore, the regulation and in particular the counterparty credit risk began to to be considered and quantified. Cons…