Related papers: The Simple Yield Curve Models
US Yield curve has recently collapsed to its most flattened level since subprime crisis and is close to the inversion. This fact has gathered attention of investors around the world and revived the discussion of proper modeling and…
In fixed income sector, the yield curve is probably the most observed indicator by the market for trading and fifinancing purposes. A yield curve plots interest rates across different contract maturities from short end to as long as 30…
The purpose of this paper relies on the study of long term yield curves modeling. Inspired by the economic litterature, it provides a financial interpretation of the Ramsey rule that links discount rate and marginal utility of aggregate…
We present an arbitrage-free non-parametric yield curve prediction model which takes the full (discretized) yield curve as state variable. We believe that absence of arbitrage is an important model feature in case of highly correlated data,…
The notion of a credit spread curve is fundamental in fixed income investing, but in practice it is not `given' and needs to be constructed from bond prices either for a particular issuer, or for a sector rating-by-rating. Rather than…
The crisis that affected financial markets in the last years leaded market practitioners to revise well known basic concepts like the ones of discount factors and forward rates. A single yield curve is not sufficient any longer to describe…
This paper presents an axiomatic scheme for interest rate models in discrete time. We take a pricing kernel approach, which builds in the arbitrage-free property and provides a link to equilibrium economics. We require that the pricing…
Viewing a yield curve as a sparse collection of measurements on a latent continuous random function allows us to model it statistically as a sparsely observed functional time series. Doing so, we use the state-of-the-art methods in…
We derive an equation of motion for interest-rate yield curves by applying a minimum Fisher information variational approach to the implied probability density. By construction, solutions to the equation of motion recover observed bond…
We present a family of models for the term structure of interest rates which describe the interest rate curve as a stochastic process in a Hilbert space. We start by decomposing the deformations of the term structure into the variations of…
We construct models for the pricing and risk management of inflation-linked derivatives. The models are rational in the sense that linear payoffs written on the consumer price index have prices that are rational functions of the state…
We revisit the problem of pricing and hedging plain vanilla single-currency interest rate derivatives using multiple distinct yield curves for market coherent estimation of discount factors and forward rates with different underlying rate…
We consider the flow of multiple particles in a Bingham fluid in an anti-plane shear flow configuration. The limiting situation in which the internal and applied forces balance and the fluid and particles stop flowing, that is, when the…
We introduce a class of short-rate models that exhibit a ``higher for longer'' phenomenon. Specifically, the short-rate is modeled as a general time-homogeneous one-factor Markov diffusion on a finite interval. The lower endpoint is assumed…
We consider the setting in which an electric power utility seeks to curtail its peak electricity demand by offering a fixed group of customers a uniform price for reductions in consumption relative to their predetermined baselines. The…
We study U.S. Treasury yield curve forecasting under distributional uncertainty and recast forecasting as an operations research and managerial decision problem. Rather than minimizing average forecast error, the forecaster selects a…
Interest-rate risk is a key factor for property-casualty insurer capital. P&C companies tend to be highly leveraged, with bond holdings much greater than capital. For GAAP capital, bonds are marked to market but liabilities are not, so…
The purpose of this paper relies on the study of long term affine yield curves modeling. It is inspired by the Ramsey rule of the economic literature, that links discount rate and marginal utility of aggregate optimal consumption. For such…
We consider a short rate model, driven by a stochastic process on the cone of positive semidefinite matrices. We derive sufficient conditions ensuring that the model replicates normal, inverse or humped yield curves.
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…