Related papers: Modelling interest rates by correlated multi-facto…
In this paper, we propose a new exogenous model to address the problem of negative interest rates that preserves the analytical tractability of the original Cox-Ingersoll-Ross (CIR) model with a perfect fit to the observed term-structure.…
The lifetime behaviour of loans is notoriously difficult to model, which can compromise a bank's financial reserves against future losses, if modelled poorly. Therefore, we present a data-driven comparative study amongst three techniques in…
SOFR derivatives market remains illiquid and incomplete so it is not amenable to classical risk-neutral term structure models which are based on the assumption of perfect liquidity and completeness. This paper develops a statistical SOFR…
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…
Several studies have established the predictive power of the yield curve in terms of real economic activity. In this paper we use data for a variety of E.U. countries: both EMU (Germany, France, Italy) and non-EMU members (Sweden and the…
Many countries have adopted negative interest rate policies with tiering remuneration, which allows for exemption from negative rates. This practice has led to higher interbank trading volumes, with market rates ranging between zero and the…
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…
We set up a structural model to study credit risk for a portfolio containing several or many credit contracts. The model is based on a jump--diffusion process for the risk factors, i.e. for the company assets. We also include correlations…
This paper addresses the structure and dynamics of an open market economy and its relations with the real interest rate. In this respect, the paper is situated within a broad conventional literature. However, it departs from the standard…
In this letter, I consider the issue of pricing risky debt by following Merton's approach. I generalize Merton's results to the case where the interest rate is modeled by the CIR term structure. Exact closed forms are provided for the risky…
The discrete-time multifactor Vasi\v{c}ek model is a tractable Gaussian spot rate model. Typically, two- or three-factor versions allow one to capture the dependence structure between yields with different times to maturity in an…
I present the technique which can analyse some interest rate models: Constantinides-Ingersoll, CIR-model, geometric CIR and Geometric Brownian Motion. All these models have the unified structure of Whittaker function. The main focus of this…
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…
We propose a continuous model for evolutionary rate variation across sites and over the tree and derive exact transition probabilities under this model. Changes in rate are modelled using the CIR process, a diffusion widely used in…
Understanding variable dependence, particularly eliciting their statistical properties given a set of covariates, provides the mathematical foundation in practical operations management such as risk analysis and decision-making given…
We calibrate and test various variants of field theory models of the interest rate with data from eurodollars futures. A model based on a simple psychological factor are seen to provide the best fit to the market. We make a model…
In many practical applications, evaluating the joint impact of combinations of environmental variables is important for risk management and structural design analysis. When such variables are considered simultaneously, non-stationarity can…
In this paper, we consider a stochastic model based on the Cox- Ingersoll- Ross model (CIR). The stochastic model is parameterized analytically by applying It\^o's calculus and the trend functions of the proposed process is calculated. The…
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…
We develop a one-dimensional notion of affine processes under parameter uncertainty, which we call non-linear affine processes. This is done as follows: given a set of parameters for the process, we construct a corresponding non-linear…