Related papers: Modelling interest rates by correlated multi-facto…
Interest-rate risk is a key factor for property-casualty insurer capital. P&C companies tend to be highly leveraged, with bond holdings much greater than capital. For GAAP capital, bonds are marked to market but liabilities are not, so…
A simple method is proposed to estimate the instantaneous correlations between state variables in a hybrid system from the empirical correlations between observable market quantities such as spot rate, stock price and implied volatility.…
In this paper we study empirically the Forward Rate Curve (FRC) of 5 different currencies. We confirm and extend the findings of our previous investigation of the U.S. Forward Rate Curve. In particular, the average FRC follows a square-root…
Compartmental transmission models have become an invaluable tool to study the dynamics of infectious diseases. The Susceptible-Infectious-Recovered (SIR) model is known to have an exact semi-analytical solution. In the current study, the…
Inflation exhibits state-dependent, skewed, and fat-tailed dynamics that make risk a central concern for monetary policy. Accordingly, inflation risks are distributional and cannot be fully captured by mean-based models. We propose a…
Persistent shifts in term-structure dynamics undermine the stability of single-regime models in long samples. We develop an arbitrage-free regime-switching generalized CIR (RS-GCIR) model that jointly prices the Chinese government bond…
Consider an insurance company exposed to a stochastic economic environment that contains two kinds of risk. The first kind is the insurance risk caused by traditional insurance claims, and the second kind is the financial risk resulting…
The paper is devoted to the study of the short rate equation of the form $$ dR(t)=F(R(t))dt+\sum_{i=1}^{d}G_i(R(t-))dZ_i(t), \quad R(0)=x\geq 0, \quad t>0, $$ with deterministic functions $F,G_1,...,G_d$ and independent L\'evy processes of…
The purpose of the present paper is to incorporate stochastic interest rates into a matrix-approach to multi-state life insurance, where formulas for reserves, moments of future payments and equivalence premiums can be obtained as explicit…
A bivariate integer-valued autoregressive process of order 1 (BINAR(1)) with copula-joint innovations is studied. Different parameter estimation methods are analyzed and compared via Monte Carlo simulations with emphasis on estimation of…
Conditional value-at-risk (CoVaR) is one of the most important measures of systemic risk. It is defined as the high quantile conditional on a related variable being extreme, widely used in the field of quantitative risk management. In this…
The importance of unspanned macroeconomic variables for Dynamic Term Structure Models has been intensively discussed in the literature. To our best knowledge the earlier studies considered only linear interactions between the economy and…
This paper contains a phenomenological description of the whole U.S. forward rate curve (FRC), based on an data in the period 1990-1996. We find that the average FRC (measured from the spot rate) grows as the square-root of the maturity,…
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,…
This article describes a simple Susceptible Infected Recovered (SIR) model fitting with COVID-19 data for the month of march 2020 in New York (NY) state. The model is a classical SIR, but is non-autonomous; the rate of susceptible people…
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…
The Convolution and Master equations governing the time behavior of the term structure of Interest Rates are set up both for continuous variables and for their discretised forms. The notion of Seed is introduced. The discretised theoretical…
The purpose of this work is to give a contribution to the understanding of the COVID-19 contagion in Italy. To this end, we developed a modified Susceptible-Infected-Recovered (SIR) model for the contagion, and we used official data of the…
In this paper we estimate the conditional value-at-risk by fitting different multivariate parametric models capturing some stylized facts about multivariate financial time series of equity returns: heavy tails, negative skew, asymmetric…
Mixed Probit models are widely applied in many fields where prediction of a binary response is of interest. Typically, the random effects are assumed to be independent but this is seldom the case for many real applications. In the credit…