Related papers: Term structure modelling with overnight rates beyo…

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…

The LIBOR rate is currently scheduled for discontinuation, and the replacement advocated by regulators in the US is the Secured Overnight Financing Rate (SOFR). The change has the potential to disrupt the $200 trillion market of derivatives…

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…

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…

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…

With the reform of interest rate benchmarks, interbank offered rates (IBORs) like LIBOR have been replaced by risk-free rates (RFRs), such as the Secured Overnight Financing Rate (SOFR) in the U.S. and the Euro Short-Term Rate (\euro STR)…

This note studies a certain stochastic evolution equation in the space of probability measures, including existence and uniqueness results. A solution of this equation gives rise, in a natural way, to an interest rate term structure model,…

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…

In this paper we introduce a flexible HJM-type framework that allows for consistent modelling of intraday, spot, futures, and option prices. This framework is based on stochastic processes with economic interpretations and consistent with…

Explicitly taking into account the risk incurred when borrowing at a shorter tenor versus lending at a longer tenor ("roll-over risk"), we construct a stochastic model framework for the term structure of interest rates in which a frequency…

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…

We consider a generalization of the Heath Jarrow Morton model for the term structure of interest rates where the forward rate is driven by Paretian fluctuations. We derive a generalization of It\^{o}'s lemma for the calculation of a…

We develop a unified framework for modeling multiple term structures arising in financial, insurance, and energy markets, adopting an extended Heath-Jarrow-Morton (HJM) approach under the real-world probability. We study market viability…

We provide a general HJM framework for forward contracts written on abstract market indices with arbitrary fixing and payment adjustments, and featuring collateralization in any currency denominations. In view of this, we first provide a…

We study the Hull-White model for the term structure of interest rates in the presence of volatility uncertainty. The uncertainty about the volatility is represented by a set of beliefs, which naturally leads to a sublinear expectation and…

In this work we introduce Heath-Jarrow-Morton (HJM) interest rate models driven by fractional Brownian motions. By using support arguments we prove that the resulting model is arbitrage free under proportional transaction costs in the same…

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…

We give a comprehensive review of credit term structure modeling methodologies. The conventional approach to modeling credit term structure is summarized and shown to be equivalent to a particular type of the reduced form credit risk model,…

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.…

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…