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Mortgage prepayments play a crucial role in the pricing and hedging of mortgage backed securities. An important feature of mortgage prepayment modeling is burnout; as time goes on those borrowers who have the greatest tendency to refinance…

Adaptation and Self-Organizing Systems · Physics 2007-05-23 Mark B. Wise , Vineer Bhansali

We present a thorough empirical study on real interest rates by also including risk aversion through the introduction of the market price of risk. With the view of complex systems science and its multidisciplinary approach, we use the…

Mathematical Finance · Quantitative Finance 2023-12-29 J. Doyne Farmer , John Geanakoplos , Matteo G. Richiardi , Miquel Montero , Josep Perelló , Jaume Masoliver

In this paper, we present a Newton-like method based on model reduction techniques, which can be used in implicit numerical methods for approximating the solution to ordinary differential equations. In each iteration, the Newton-like method…

Numerical Analysis · Mathematics 2023-03-14 Tobias K. S. Ritschel

We introduce here for the first time the long-term swap rate, characterised as the fair rate of an overnight indexed swap with infinitely many exchanges. Furthermore we analyse the relationship between the long-term swap rate, the long-term…

Pricing of Securities · Quantitative Finance 2019-06-17 Francesca Biagini , Alessandro Gnoatto , Maximilian Härtel

I develop and estimate a dynamic equilibrium model of risky entrepreneurs' borrowing and savings decisions incorporating both formal and local-informal credit markets. Households have access to an exogenous formal credit market and to an…

General Economics · Economics 2022-04-27 Fan Wang

Microlending, where a bank lends to a small group of people without credit histories, began with the Grameen Bank in Bangladesh, and is widely seen as the creation of Muhammad Yunus, who received the Nobel Peace Prize in recognition of his…

Mathematical Finance · Quantitative Finance 2021-01-27 Philip Protter , Alejandra Quintos

The estimate of a Multiperiod probability of default applied to residential mortgages can be obtained using the mean of the observed default, so called the Mean of ratios estimator, or aggregating the default and the issued mortgages and…

Applications · Statistics 2014-09-18 Matteo Formenti

We argue that a negative interest rate policy (NIRP) can be an effect tool for macroeconomic stabilization. We first discuss how implementing negative rates on reserves held at a central bank does not pose any theoretical difficulty, with a…

General Economics · Economics 2018-08-27 Matheus R. Grasselli , Alexander Lipton

Implicit sampling is a weighted sampling method that is used in data assimilation, where one sequentially updates estimates of the state of a stochastic model based on a stream of noisy or incomplete data. Here we describe how to use…

Numerical Analysis · Mathematics 2016-01-20 Matthias Morzfeld , Xuemin Tu , Jon Wilkening , Alexandre J. Chorin

Digital loans have exploded in popularity across low and middle income countries, providing short term, high interest credit via mobile phones. This paper reports the results of a randomized evaluation of a digital loan product in Nigeria.…

The Consumer Financial Protection Bureau defines the notion of payoff amount as the amount that has to be payed at a particular time in order to completely pay off the debt, in case the lender intends to pay off the loan early, way before…

Mathematical Finance · Quantitative Finance 2023-07-03 Fausto Di Biase , Stefano Di Rocco , Alessandra Ortolano , Maurizio Parton

Implicit models, which allow for the generation of samples but not for point-wise evaluation of probabilities, are omnipresent in real-world problems tackled by machine learning and a hot topic of current research. Some examples include…

Machine Learning · Statistics 2018-04-27 Yingzhen Li , Richard E. Turner

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…

General Finance · Quantitative Finance 2010-05-11 Periklis Gogas , Ioannis Pragidis

In this paper an efficient and reliable method for stochastic yield estimation is presented. Since one main challenge of uncertainty quantification is the computational feasibility, we propose a hybrid approach where most of the Monte Carlo…

Computational Engineering, Finance, and Science · Computer Science 2020-10-12 Mona Fuhrländer , Sebastian Schöps

Option prices encode the market's collective outlook through implied density and implied volatility. An explicit link between implied density and implied volatility translates the risk-neutrality of the former into conditions on the latter…

Computational Finance · Quantitative Finance 2026-03-19 Jimin Lin

Functional iterations such as Newton's are a popular tool for polynomial root-finding. We consider realistic situation where some (e.g., better-conditioned) roots have already been approximated and where further computations is directed to…

Numerical Analysis · Mathematics 2019-07-09 Remi Imbach , Victor Y. Pan , Chee Yap , Ilias S. Kotsireas , Vitaly Zaderman

This work studies the global convergence and implicit bias of Gauss Newton's (GN) when optimizing over-parameterized one-hidden layer networks in the mean-field regime. We first establish a global convergence result for GN in the…

Machine Learning · Computer Science 2023-12-13 Michael Arbel , Romain Menegaux , Pierre Wolinski

Unconventional monetary policy (UMP) may make the effective lower bound (ELB) on the short-term interest rate irrelevant. We develop a theoretical model that underpins our empirical test of this `irrelevance hypothesis' based on the simple…

General Economics · Economics 2023-11-17 Daisuke Ikeda , Shangshang Li , Sophocles Mavroeidis , Francesco Zanetti

Inference for doubly intractable distributions is challenging because the intractable normalizing functions of these models include parameters of interest. Previous auxiliary variable MCMC algorithms are infeasible for multi-dimensional…

Computation · Statistics 2020-08-07 Jaewoo Park

High future discounting rates favor inaction on present expending while lower rates advise for a more immediate political action. A possible approach to this key issue in global economy is to take historical time series for nominal interest…

Mathematical Finance · Quantitative Finance 2020-05-07 Josep Perelló , Miquel Montero , Jaume Masoliver , J. Doyne Farmer , John Geanakoplos
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