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.
Method to decompose portfolio performance into FX, interest rate, carry, and residual market risks.
Investment strategy optimized for ambiguity and interest rate risk.
This research improves DeFi interest rates using a PID control system.
The paper analyzes insurance risks using stochastic models.
Study proposes optimal risk-aware interest rates for crypto lending protocols.
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 mark…
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 …
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…
Unified Bayesian framework for CAT bond pricing.
Develops a bi-variate stochastic framework to model mortality and interest rates with long-range dependence.
Explicitly taking into account the risk incurred when borrowing at a shorter tenor versus lending at a longer tenor ("roll-over risk"), we construct a stochastic model framework for the term structure of interest rates in which a frequency basis (i.e. a spread applied to one leg of a swap to exchange one floating inter…
New risk measure considers horizon risk and interest rate uncertainty.
Analysis finds no evidence of banks managing deposit run risk prior to 2023 Regional Banking Crisis.
The paper proposes a new method to estimate interest rates consistently under both risk-neutral and real-world measures.
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…
Proposes a bond portfolio solution for managing interest rate risk.
A robust machine learning approach forecasts U.S. Treasury yields, reducing risk for investors.
Novel pricing method for equity-indexed annuities under uncertain volatility and stochastic interest rate.
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 …
The paper uses stochastic control to analyze interest rate markets with roll-over risk.
The paper develops a valuation framework for GLWB-LTC contracts with Levy dynamics and stochastic interest rates.
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…
Enhanced Gordon growth model for valuing financial products.
Retail investors set interest rates for P2P loans based on borrower characteristics.
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…
The study highlights the importance of Wrong-Way Risk in FVA calculations during financial market turmoil.
The purpose of this paper is introducing rigorous methods and formulas for bilateral counterparty risk credit valuation adjustments (CVA's) on interest-rate portfolios. In doing so, we summarize the general arbitrage-free valuation framework for counterparty risk adjustments in presence of bilateral default risk, as de…
The study models mortgage prepayment risk, accounting for behavioral uncertainty, and provides replication strategies.
Italian banks use swaps to hedge against rising interest rates, offsetting losses on debt securities.
This article presents valuation of Treasury Bonds (T-Bonds) on Macedonian Stock Exchange (MSE) and empirical test of duration, modified duration and convexity of the T-bonds at MSE in order to determine sensitivity of bonds prices on interest rate changes. The main goal of this study is to determine how standard valuat…
In this work, I generalize Merton's approach of pricing risky debt to the case where the interest rate risk is modeled by the CIR term structure. Closed form result for pricing the debt is given for the case where the firm value has non-zero correlation with the interest rate. This extends previous closed form pricing …
A simplified model for fixed income portfolio optimisation.
Model predicts default risk based on company's financial forecasts and credit conditions.
This paper focuses on the pricing of the variance swap in an incomplete market where the stochastic interest rate and the price of the stock are respectively driven by Cox-Ingersoll-Ross model and Heston model with simultaneous Lévy jumps. By using the equilibrium framework, we obtain the pricing kernel and the equival…
A new class of risk measures called cash sub-additive risk measures is introduced to assess the risk of future financial, nonfinancial and insurance positions. The debated cash additive axiom is relaxed into the cash sub additive axiom to preserve the original difference between the numeraire of the current reserve amo…
Enhances systemic risk analysis by incorporating debt valuation factors.
Unified model for equity option pricing and interest-rate risk assessment.
Enhances valuation of variable annuities with stochastic interest rate models.
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…
This paper generalizes the framework for arbitrage-free valuation of bilateral counterparty risk to the case where collateral is included, with possible re-hypotecation. We analyze how the payout of claims is modified when collateral margining is included in agreement with current ISDA documentation. We then specialize…
We propose a model for the joint evolution of European inflation, the European Central Bank official interest rate and the short-term interest rate, in a stochastic, continuous time setting. We derive the valuation equation for a contingent claim depending potentially on all three factors. This valuation equation reduc…
During the last two years, Europe has been facing a debt crisis, and Greece has been at its center. In response to the crisis, drastic actions have been taken, including the halving of Greek debt. Policy makers acted because interest rates for sovereign debt increased dramatically. High interest rates imply that defaul…
We propose a modification of the classical Black-Derman-Toy (BDT) interest rate tree model, which includes the possibility of a jump with small probability at each step to a practically zero interest rate. The corresponding BDT algorithms are consequently modified to calibrate the tree containing the zero interest rate…
Develops European power option pricing under correlated interest rate and asset processes.
Derivatives impact U.S. banking sector's systemic risk, but loan and leverage ratios are more significant.
Derives PDEs for pricing RFR derivatives under a new FMM model.
In an incomplete continuous-time securities market with uncertainty generated by Brownian motions, we derive closed-form solutions for the equilibrium interest rate and market price of risk processes. The economy has a finite number of heterogeneous exponential utility investors, who receive partially unspanned income …
This work reduces DIM computation costs by training neural networks on single MC paths.