Related papers: Dynamic Term Structure Models for SOFR Futures
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…
The Secured Overnight Funding Rate (SOFR) is becoming the main Risk-Free Rate benchmark in US dollars, thus interest rate term structure models need to be updated to reflect the key features exhibited by the dynamics of SOFR and the forward…
Overnight rates, such as the SOFR (Secured Overnight Financing Rate) in the US, are central to the current reform of interest rate benchmarks. A striking feature of overnight rates is the presence of jumps and spikes occurring at…
SOFR derivatives market remains illiquid and incomplete so it is not amenable to classical risk-neutral term structure models which are based on the assumption of perfect liquidity and completeness. This paper develops a statistical SOFR…
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…
With the reform of interest rate benchmarks, interbank offered rates (IBORs) like LIBOR have been replaced by risk-free rates (RFRs), such as the Secured Overnight Financing Rate (SOFR) in the U.S. and the Euro Short-Term Rate (\euro STR)…
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:…
The paper contributes to the rare literature modeling term structure of crude oil markets. We explain term structure of crude oil prices using dynamic Nelson-Siegel model, and propose to forecast them with the generalized regression…
The financial industry has undergone a significant transition from the London Interbank Offered Rates (LIBORs) to Risk Free Rates (RFRs) such as, e.g., the Secured Overnight Financing Rate (SOFR) in the U.S. and the Cash Rate (AONIA) in…
The Nelson-Siegel framework is employed to model the term structure of commodity futures prices. Exploiting the information embedded in the level, slope and curvature parameters, we develop novel investment strategies that assume short-term…
This paper gives an arbitrage-free prediction for future prices of an arbitrary co-terminal set of options with a given maturity, based on the observed time series of these option prices. The statistical analysis of such a multi-dimensional…
We develop a model for the dynamic evolution of default-free and defaultable interest rates in a LIBOR framework. Utilizing the class of affine processes, this model produces positive LIBOR rates and spreads, while the dynamics are…
Recent literature seek to forecast implied volatility derived from equity, index, foreign exchange, and interest rate options using latent factor and parametric frameworks. Motivated by increased public attention borne out of the…
We introduce a perturbative formalism to solve the backward-looking futures pricing problem. The formalism is based on a time-ordered exponential series which allows to derive the functional form of the integral kernel associated to the…
It is well known that the Cox-Ingersoll-Ross (CIR) stochastic model to study the term structure of interest rates, as introduced in 1985, is inadequate for modelling the current market environment with negative short interest rates.…
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…
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…
We consider a market with a term structure of credit risky bonds in the single-name case. We aim at minimal assumptions extending existing results in this direction: first, the random field of forward rates is driven by a general…
We develop an arbitrage-free deep learning framework for yield curve and bond price forecasting based on the Heath-Jarrow-Morton (HJM) term-structure model and a dynamic Nelson-Siegel parameterization of forward rates. Our approach embeds a…
This paper introduces a novel stochastic model for credit spreads. The stochastic approach leverages the diffusion of default intensities via a CIR++ model and is formulated within a risk-neutral probability space. Our research primarily…