Related papers: Moment Explosion in the LIBOR Market Model

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…

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…

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…

In this paper we consider the pricing of options on interest rates such as caplets and swaptions in the L\'evy Libor model developed by Eberlein and \"Ozkan (2005). This model is an extension to L\'evy driving processes of the classical…

We present compelling empirical evidence for a new interpretation of the Forward Rate Curve (FRC) term structure. We find that the average FRC follows a square-root law, with a prefactor related to the spot volatility, suggesting a…

We formulate a forward inflation index model with multi-factor volatility structure featuring a parametric form that allows calibration to correlations between indices of different tenors observed in the market. Assuming the nominal…

At present, there is an explosion of practical interest in the pricing of interest rate (IR) derivatives. Textbook pricing methods do not take into account the leptokurticity of the underlying IR process. In this paper, such a leptokurtic…

In this paper, we present an alternative perspective on the mean-field LIBOR market model introduced by Desmettre et al. in arXiv:2109.10779. Our novel approach embeds the mean-field model in a classical setup, but retains the crucial…

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…

An extension of the Heath--Jarrow--Morton model for the development of instantaneous forward interest rates with deterministic coefficients and Gaussian as well as L\'evy field noise terms is given. In the special case where the L\'evy…

In this paper, we establish a market model for the term structure of forward inflation rates based on the risk-neutral dynamics of nominal and real zero-coupon bonds. Under the market model, we can price inflation caplets as well as…

This paper analyzes several interest rates time series from the United Kingdom during the period 1999 to 2014. The analysis is carried out using a pioneering statistical tool in the financial literature: the complexity-entropy causality…

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,…

This paper considers the modelling of collateralized debt obligations (CDOs). We propose a top-down model via forward rates generalizing Filipovi\'c, Overbeck and Schmidt (2009) to the case where the forward rates are driven by a finite…

The Interbank Offered Rate is a vital benchmark interest rate in the financial markets of every country to which financial contracts are tied. In the light of the recent LIBOR manipulation incident, this paper seeks to address the fear that…

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…

Over the last decade, dividends have become a standalone asset class instead of a mere side product of an equity investment. We introduce a framework based on polynomial jump-diffusions to jointly price the term structures of dividends and…

Existence of solutions to the Heath-Jarrow-Morton equation of the bond market with linear volatility and general L\'evy random factor is studied. Conditions for existence and non-existence of solutions in the class of bounded fields are…

We introduce a class of interest rate models, called the $\alpha$-CIR model, which gives a natural extension of the standard CIR model by adopting the $\alpha$-stable L{\'e}vy process and preserving the branching property. This model allows…

We investigate the existence of affine realizations for L\'{e}vy driven interest rate term structure models under the real-world probability measure, which so far has only been studied under an assumed risk-neutral probability measure. For…