Related papers: Short Rate Dynamics: A Fed Funds and SOFR perspect…
Time series foundation models (FMs) have emerged as a popular paradigm for zero-shot multi-domain forecasting. These models are trained on numerous diverse datasets and claim to be effective forecasters across multiple different time series…
Alternative risk-free rates (RFRs) play a central role in the reform of interest rate benchmarks. We study a model for RFRs driven by a general affine process. Under minimal assumptions, we derive explicit valuation formulas for…
We introduce the self-excited multifractal (SEMF) model, defined such that the amplitudes of the increments of the process are expressed as exponentials of a long memory of past increments. The principal novel feature of the model lies in…
Financial time series forecasting is central to trading, portfolio optimization, and risk management, yet it remains challenging due to noisy, non-stationary, and heterogeneous data. Recent advances in time series foundation models (TSFMs),…
Financial time series forecasting presents significant challenges due to complex nonlinear relationships, temporal dependencies, variable interdependencies and limited data availability, particularly for tasks involving low-frequency data,…
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…
A prominent challenge to the safe and optimal operation of the modern power grid arises due to growing uncertainties in loads and renewables. Stochastic optimal power flow (SOPF) formulations provide a mechanism to handle these…
We extend the short rate model of Turfus and Romero-Berm\'udez [2021] to facilitate accurate arbitrage-free analytic pricing of SOFR, SONIA or ESTR caplets, i.e. options on backward-looking compounded rates payments, in a manner consistent…
The lifetime behaviour of loans is notoriously difficult to model, which can compromise a bank's financial reserves against future losses, if modelled poorly. Therefore, we present a data-driven comparative study amongst three techniques in…
We consider an HJM model setting for Markov-chain modulated forward rates. The underlying Markov chain is assumed to induce regime switches on the forward curve dynamics. Our primary focus is on the interest rate and energy futures markets.…
This study develops an integrated stochastic modeling framework for pricing short and medium-maturity equity options and assessing interest-rate risk using the Heston (1993), Bates (1996), and CIR (1985) models. We calibrate the Heston…
In this paper, we study term structure movements in the spirit of Heath, Jarrow, and Morton [Econometrica 60(1), 77-105] under volatility uncertainty. We model the instantaneous forward rate as a diffusion process driven by a G-Brownian…
Using a recently introduced method to quantify the time varying lead-lag dependencies between pairs of economic time series (the thermal optimal path method), we test two fundamental tenets of the theory of fixed income: (i) the stock…
The paper uses functional auto-regression to predict the dynamics of interest rate curve. It estimates the auto-regressive operator by extending methods of the reduced-rank auto-regression to the functional data. Such an estimation…
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…
In this paper, we propose a semi-analytical approach to pricing options on SOFR futures where the underlying SOFR follows a time-dependent CEV model. By definition, these options change their type at the beginning of the reference period:…
This paper is concerned with finite dimensional models for the entire term structure for energy futures. As soon as a finite dimensional set of possible yield curves is chosen, one likes to estimate the dynamic behaviour of the yield curve…
We develop a medium-size semi-structural time series model of inflation dynamics that is consistent with the view - often expressed by central banks - that three components are important: a trend anchored by long-run expectations, a…
High-frequency trading (HFT) represents a pivotal and intensely competitive domain within the financial markets. The velocity and accuracy of data processing exert a direct influence on profitability, underscoring the significance of this…
In the analysis of commodity futures, it is commonly assumed that futures prices are driven by two latent factors: short-term fluctuations and long-term equilibrium price levels. In this study, we extend this framework by introducing a…