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 develops a new formula for financial pricing under multiple interest rates and collateralization.
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…
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…
Abstract framework for cross-currency interest rate contracts.
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…
This paper examines interest rates and market efficiency in DeFi loanable funds protocols.
Examines SOFR derivatives pricing and hedging post-LIBOR discontinuation.
Bubbles are essential in certain economic models with high growth and low interest rates.
Genetic Algorithm improves Nelson-Siegel-Svensson model calibration for interest rates.
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 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…
We construct models for the pricing and risk management of inflation-linked derivatives. The models are rational in the sense that linear payoffs written on the consumer price index have prices that are rational functions of the state variables. The nominal pricing kernel is constructed in a multiplicative manner that …
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…
The paper models exchange rate risk premium using mean-reverting dynamics.
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…
The Wiener chaos approach to interest rate modelling arises from the observation that the pricing kernel admits a representation in terms of the conditional variance of a square-integrable random variable, which in turn admits a chaos expansion. When the expansion coefficients factorise into multiple copies of a single…
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…
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…
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…
We develop methods to estimate lag and parameters for multiple stable autoregressive processes.
The study models mortgage prepayment risk, accounting for behavioral uncertainty, and provides replication strategies.
We consider the class of affine LIBOR models with multiple curves, which is an analytically tractable class of discrete tenor models that easily accommodates positive or negative interest rates and positive spreads. By introducing an interpolating function, we extend the affine LIBOR models to a continuous tenor and de…
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 market practice of extrapolating different term structures from different instruments lacks a rigorous justification in terms of cash flows structure and market observables. In this paper, we integrate our previous consistent theory for pricing under credit, collateral and funding risks into term structure modellin…
We develop a modelling framework for multiple yield curves driven by continuous-state branching processes with immigration (CBI processes). Exploiting the self-exciting behavior of CBI jump processes, this approach can reproduce the relevant empirical features of spreads between different interbank rates. In particular…
This research improves DeFi interest rates using a PID control system.
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…
Study proposes optimal risk-aware interest rates for crypto lending protocols.
Unified framework controls false discovery rate in bandit multiple testing.
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…
Developed unbiased estimators for Heston model with stochastic interest rates.
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…
Enhances valuation of variable annuities with stochastic interest rate models.
The study shows interest rates impact investment and funding negatively but positively on dividend decisions.
Clarifies interest rate cap rules for loans with unconventional cash flows.
SynthBH uses synthetic data to control FDR in multiple testing.
Derives equations for life insurance reserves with interest rate uncertainty.
Quantum computing speeds up interest rate derivative pricing using LMM.
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…
We develop a general term structure framework taking stochastic discontinuities explicitly into account. Stochastic discontinuities are a key feature in interest rate markets, as for example the jumps of the term structures in correspondence to monetary policy meetings of the ECB show. We provide a general analysis of …
In the forthcoming ISDA Standard Credit Support Annex (SCSA), the trades denominated in non-G5 currencies as well as those include multiple currencies are expected to be allocated to the USD silo, where the contracts are collateralized by USD cash, or a different currency with an appropriate interest rate overlay to ac…
The paper analyzes insurance risks using stochastic models.
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…
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…
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…
Study optimizes dividend payout strategies under fluctuating interest rates.
Develops a bi-variate stochastic framework to model mortality and interest rates with long-range dependence.