Related papers: Interest Rate Manipulation Detection using Time Se…
The interbank market is considered one of the most important channels of contagion. Its network representation, where banks and claims/obligations are represented by nodes and links (respectively), has received a lot of attention in the…
Applying historical data from the USD LIBOR transition period, we estimate a joint model for SOFR, Fed Funds, and Eurodollar futures rates as well as spot USD LIBOR and term repo rates. The framework endogenously models basis spreads…
Interbank lending and borrowing occur when financial institutions seek to settle and refinance their mutual positions over time and circumstances. This interactive process involves money creation at the aggregate level. Coordination…
Assessing the stability of economic systems is a fundamental research focus in economics, that has become increasingly interdisciplinary in the currently troubled economic situation. In particular, much attention has been devoted to the…
In order to overcome the drawbacks of assuming deterministic volatility coefficients in the standard LIBOR market models to capture volatility smiles and skews in real markets, several extensions of LIBOR models to incorporate stochastic…
In this paper we propose a semi-Markov modulated model of interest rates. We assume that the switching process is a semi-Markov process with finite state space E and the modulated process is a diffusive process. We derive recursive…
We study the international interbank market through a geometrical and a topological analysis of empirical data. The geometrical analysis of the time series of cross-country liabilities shows that the systematic information of the interbank…
The LIBOR has served since the 1970s as a fundamental measure for floating term rates across multiple currencies and maturities. However, in 2017 the Financial Conduct Authority announced the discontinuation of LIBOR from the end of 2021…
In this article, we review the construction and properties of some popular approaches to modeling LIBOR rates. We discuss the following frameworks: classical LIBOR market models, forward price models and Markov-functional models. We close…
Prepayment risk embedded in fixed-rate mortgages forms a significant fraction of a financial institution's exposure, and it receives particular attention because of the magnitude of the underlying market. The embedded prepayment option…
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 provide a unified framework for modeling LIBOR rates using general semimartingales as driving processes and generic functional forms to describe the evolution of the dynamics. We derive sufficient conditions for the model to be…
We investigate the joint description of the interest-rate term stuctures of Italy and an AAA-rated European country by mean of a --here proposed-- correlated CIR-like bivariate model where one of the state variables is interpreted as a…
The topological properties of interbank networks have been discussed widely in the literature mainly because of their relevance for systemic risk. Here we propose to use the Stochastic Block Model to investigate and perform a model…
We provide a general and flexible approach to LIBOR modeling based on the class of affine factor processes. Our approach respects the basic economic requirement that LIBOR rates are non-negative, and the basic requirement from mathematical…
We show that, for the purpose of pricing Swaptions, the Swap rate and the corresponding Forward rates can be considered lognormal under a single martingale measure. Swaptions can then be priced as options on a basket of lognormal assets and…
This paper empirically analyzes a dataset published by the European Banking Authority. Our main aim was to study how the Leverage Ratio is affected by adverse financial scenarios. This was be followed by observing how Leverage Ratio…
Banks in the interbank network can not assess the true risks associated with lending to other banks in the network, unless they have full information on the riskiness of all the other banks. These risks can be estimated by using network…
The hypothesis that committed revolving credit lines with fixed spreads can provide firms with interest rate insurance is a standard feature of models on these credit facilities' interest rate structure. Nevertheless, this hypothesis has…
The interbank market has a natural multiplex network representation. We employ a unique database of supervisory reports of Italian banks to the Banca d'Italia that includes all bilateral exposures broken down by maturity and by the secured…