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.
Neural model improves option pricing by calibrating additive process term structure.
Divides state space into regions with identical term structure shapes.
The paper proposes a new method to calibrate option pricing models that accurately match both volatility surfaces and variance term structures.
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…
A quantum field theory generalization, Baaquie, of the Heath, Jarrow, and Morton (HJM) term structure model parsimoniously describes the evolution of imperfectly correlated forward rates. Field theory also offers powerful computational tools to compute path integrals which naturally arise from all forward rate models. …
Develops a new method for financial term structure modeling.
Develops a statistical model for SOFR term structure in incomplete markets.
Unified framework models multiple financial and insurance term structures.
Lévy driven term structure models have become an important subject in the mathematical finance literature. This paper provides a comprehensive analysis of the Lévy driven Heath-Jarrow-Morton type term structure equation. This includes a full proof of existence and uniqueness in particular, which seems to have been lack…
In this paper, we consider a discrete time economy where we assume that the short term interest rate follows a quadratic term structure of a regime switching asset process. The possible non-linear structure and the fact that the interest rate can have different economic or financial trends justify the interest of Regim…
New models capture dynamic derivatives pricing with efficient simulations.
We give a comprehensive review of credit term structure modeling methodologies. The conventional approach to modeling credit term structure is summarized and shown to be equivalent to a particular type of the reduced form credit risk model, the fractional recovery of market value approach. We argue that the corporate p…
New model predicts credit spreads using stochastic CIR++ intensities.
We derive caplet volatilities for quadratic models, providing an asymptotic approximation.
Characterizes term structure models driven by Lévy processes.
In this paper, we study term structure movements in the spirit of Heath, Jarrow, and Morton [Econometrica 60(1), 77-105] under volatility uncertainty. We model the instantaneous forward rate as a diffusion process driven by a G-Brownian motion. The G-Brownian motion represents the uncertainty about the volatility. With…
We study the Hull-White model for the term structure of interest rates in the presence of volatility uncertainty. The uncertainty about the volatility is represented by a set of beliefs, which naturally leads to a sublinear expectation and a G-Brownian motion. The main question in this setting is how to find an arbitra…
The paper presents the comparative study of the nature of stock markets in short-term and long-term time scales with and without structural break in the stock data. Structural break point has been identified by applying Zivot and Andrews structural trend break model to break the original time series (TSO) into time ser…
We propose an alternative approach on the existence of affine realizations for HJM interest rate models. It is applicable to a wide class of models, and simultaneously it is conceptually rather comprehensible. We also supplement some known existence results for particular volatility structures and provide further insig…
Proposes a new VIX futures trading strategy based on term structure modeling.
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…
Study analyzes bond price covariation robustly under no-arbitrage conditions.
ARBITER learns SPX-VIX term structures without arbitrage constraints.
Model interest rates and energy futures with regime-switching dynamics.
Although conservative Hamiltonian systems with constraints can be formulated in terms of Dirac structures, a more general framework is necessary to cover also dissipative systems such as gradient and metriplectic systems with constraints. We define Leibniz-Dirac structures which lead to a natural generalization of Dira…
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 …
The aim of this paper is to present a dual-term structure model of interest rate derivatives in order to solve the two hardest problems in financial modeling: the exact volatility calibration of the entire swaption matrix, and the calculation of bucket vegas for structured products. The model takes a series of long-ter…
LIT-LVM improves linear predictors by estimating interaction terms with latent vectors.
This paper develops a two-dimensional structural framework for valuing credit default swaps and corporate bonds in the presence of default contagion. Modelling the values of related firms as correlated geometric Brownian motions with exponential default barriers, analytical formulae are obtained for both credit default…
We investigate the existence of affine realizations for term structure models driven by Lévy processes. It turns out that we obtain more severe restrictions on the volatility than in the classical diffusion case without jumps. As special cases, we study constant direction volatilities and the existence of short rate re…
This paper gives examples of explicit arbitrage-free term structure models with Lévy jumps via state price density approach. By generalizing quadratic Gaussian models, it is found that the probability density function of a Lévy process is a "natural" scale for the process to be the state variable of a market.
Identifies smooth curves for financial models.
The paper contributes to the rare literature modeling term structure of crude oil markets. We explain term structure of crude oil prices using dynamic Nelson-Siegel model, and propose to forecast them with the generalized regression framework based on neural networks. The newly proposed framework is empirically tested …
In this paper we propose a tractable quadratic programming formulation for calculating the equilibrium term structure of electricity prices. We rely on a theoretical model described in [21], but extend it so that it reflects actually traded electricity contracts, transaction costs and liquidity considerations. Our nume…
A method of simultaneously optimizing both the structure of neural networks and the connection weights in a single training loop can reduce the enormous computational cost of neural architecture search. We focus on the probabilistic model-based dynamic neural network structure optimization that considers the probabilit…
The problem of existence of arbitrage free and monotone CDO term structure models is studied. Conditions for positivity and monotonicity of the corresponding Heath-Jarrow-Morton-Musiela equation for the -forward rates with the use of the Milian type result are formulated. Two state spaces are taken into account - of…
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…
The major perspective of this paper is to provide more evidence into the empirical determinants of capital structure adjustment in different macroeconomics states by focusing and discussing the relative importance of firm-specific and macroeconomic characteristics from an alternative scope in U.S. This study extends th…
The term structure of credit spreads is studied with an aim to predict its future movements. A completely new approach to tackle this problem is presented, which utilizes nonlinear parametric models. The Brain-Cousens regression model with five parameters is chosen to describe the term structure of credit spreads. Furt…
A new framework combines CNN and GRU for better structural damage detection.
The study constructs models for SOFR term rates using futures data.
We propose a unified structural credit risk model incorporating both insolvency and illiquidity risks, in order to investigate how a firm's default probability depends on the liquidity risk associated with its financing structure. We assume the firm finances its risky assets by mainly issuing short- and long-term debt.…
We develop theory and applications of forward characteristic processes in discrete time following a seminal paper of Jan Kallsen and Paul Krühner. Particular emphasis is placed on the dynamics of volatility surfaces which can be easily formulated and implemented from the chosen discrete point of view. In mathematical t…
This work models overnight rates with jumps and discontinuities, extending classical short-rate models.
We use path integrals to calculate hedge parameters and efficacy of hedging in a quantum field theory generalization of the Heath, Jarrow and Morton (HJM) term structure model which parsimoniously describes the evolution of imperfectly correlated forward rates. We also calculate, within the model specification, the eff…
The paper stabilizes PD term structures under forecast uncertainty using a Kalman filter with an anchored observation model.
The study improves load forecasting for electricity consumers using advanced machine learning models.
This article discuss a class of tractable model in the form of polynomial type.