Related papers: Short Rate Dynamics: A Fed Funds and SOFR perspect…
We propose a framework to study optimal trading policies in a one-tick pro-rata limit order book, as typically arises in short-term interest rate futures contracts. The high-frequency trader has the choice to trade via market orders or…
Financial Transmission Rights (FTRs) enable electricity market participants to hedge congestion risk in Day Ahead Market (DAM) operations, but for the market to be solvent, Independent System Operators (ISOs) must ensure that FTR payouts do…
This study focuses on forecasting the ultimate forward rate (UFR) and developing a UFRbased bond yield prediction model using data from Chinese treasury bonds and macroeconomic variables spanning from December 2009 to December 2024. The de…
High Frequency Trading (HFT) represents an ever growing proportion of all financial transactions as most markets have now switched to electronic order book systems. The main goal of the paper is to propose continuous time equations which…
We calibrate and test various variants of field theory models of the interest rate with data from eurodollars futures. A model based on a simple psychological factor are seen to provide the best fit to the market. We make a model…
This paper aims to reevaluate the Taylor Rule, through a linear and a nonlinear method, such that its estimated federal funds rates match those actually previously implemented by the Federal Reserve Bank. In the linear method, this paper…
The two main approaches in credit risk are the structural approach pioneered in Merton (1974) and the reduced-form framework proposed in Jarrow & Turnbull (1995) and in Artzner & Delbaen (1995). The goal of this article is to provide a…
In this paper, we consider a generic interest rate market in the presence of roll-over risk, which generates spreads in spot/forward term rates. We do not require classical absence of arbitrage and rely instead on a minimal market viability…
We present a large scale benchmark of modern deep learning architectures for a financial time series prediction and position sizing task, with a primary focus on Sharpe ratio optimization. Evaluating linear models, recurrent networks,…
Decentralized Finance (DeFi) money markets have seen explosive growth in recent years, with billions of dollars borrowed in various cryptocurrency assets. Key to the safety of money markets is the implementation of interest rates that…
The SABR model is a cornerstone of interest rate volatility modeling, but its practical application relies heavily on the analytical approximation by Hagan et al., whose accuracy deteriorates for high volatility, long maturities, and…
Level, slope, and curvature are three commonly-believed principal components in interest rate term structure and are thus widely used in modeling. This paper characterizes the heterogeneity of how misspecified such models are through time.…
This paper presents empirical evidence using recently developed techniques in econophysics suggesting that the degree of long-range dependence in interest rates depends on the conduct of monetary policy. We study the term structure of…
This paper addresses the structure and dynamics of an open market economy and its relations with the real interest rate. In this respect, the paper is situated within a broad conventional literature. However, it departs from the standard…
The role of collateral in derivative pricing has evolved beyond credit risk mitigation, particularly following the global financial crisis, when funding costs and basis spreads became central to valuation practices. This development…
This paper considers general term structure models like the ones appearing in portfolio credit risk modelling or life insurance. We give a general model starting from families of forward rates driven by infinitely many Brownian motions and…
Accurate forecasting of zero coupon bond yields for a continuum of maturities is paramount to bond portfolio management and derivative security pricing. Yet a universal model for yield curve forecasting has been elusive, and prior attempts…
In the LIBOR era, banks routinely tied revolving credit facilities to credit-sensitive benchmarks. This study assesses the Across-the-Curve Credit Spread Index (AXI) -- a transparent, transaction-based measure of wholesale bank funding…
Financial markets are inherently volatile and prone to sudden disruptions such as market crashes, flash collapses, and liquidity crises. Accurate anomaly detection and early risk forecasting in financial time series are therefore crucial…
Various parametric volatility models for financial data have been developed to incorporate high-frequency realized volatilities and better capture market dynamics. However, because high-frequency trading data are not available during the…