Related papers: Interest-Rate Modeling with Multiple Yield Curves
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…
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…
The general problem of asset pricing when the discount rate differs from the rate at which an asset's cash flows accrue is considered. A pricing kernel framework is used to model an economy that is segmented into distinct markets, each…
We present a HJM approach to the projection of multiple yield curves developed to capture the volatility content of historical term structures for risk management purposes. Since we observe the empirical data at daily frequency and only for…
We provide a general and tractable framework under which all multiple yield curve modeling approaches based on affine processes, be it short rate, Libor market, or HJM modeling, can be consolidated. We model a numeraire process and…
We propose a general framework for modeling multiple yield curves which have emerged after the last financial crisis. In a general semimartingale setting, we provide an HJM approach to model the term structure of multiplicative spreads…
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…
We provide a general HJM framework for forward contracts written on abstract market indices with arbitrary fixing and payment adjustments, and featuring collateralization in any currency denominations. In view of this, we first provide a…
Collateralization with daily margining has become a new standard in the post-crisis market. Although there appeared vast literature on a so-called multi-curve framework, a complete picture of a multi-currency setup with cross-currency basis…
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…
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…
This manuscript introduces deep learning models that simultaneously describe the dynamics of several yield curves. We aim to learn the dependence structure among the different yield curves induced by the globalization of financial markets…
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…
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…
This paper advances interest rate modeling in the post-LIBOR era by introducing rough stochastic volatility into the Forward Market Model (FMM). We establish a rigorous asymptotic expansion of swaption implied volatility, connecting the FMM…
In traditional financial markets, yield curves are widely available for countries (and, by extension, currencies), financial institutions, and large corporates. These curves are used to calibrate stochastic interest rate models, discount…
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…
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…
We present a general derivation of the arbitrage-free pricing framework for multiple-currency collateralized products. We include the impact on option pricing of the policy adopted to fund in foreign currency, so that we are able to price…
We propose an elementary model to price European physical delivery swaptions in multicurve setting with a simple exact closed formula. The proposed model is very parsimonious: it is a three-parameter multicurve extension of the…