Related papers: Statistical modeling of SOFR term structure
With the reform of interest rate benchmarks, interbank offered rates (IBORs) like LIBOR have been replaced by risk-free rates (RFRs), such as the Secured Overnight Financing Rate (SOFR) in the U.S. and the Euro Short-Term Rate (\euro STR)…
We consider the problem of modelling the term structure of defaultable bonds, under minimal assumptions on the default time. In particular, we do not assume the existence of a default intensity and we therefore allow for the possibility of…
We present a new model for prediction markets, in which we use risk measures to model agents and introduce a market maker to describe the trading process. This specific choice on modelling tools brings us mathematical convenience. The…
This paper tackles challenges in pricing and revenue projections due to consumer uncertainty. We propose a novel data-based approach for firms facing unknown consumer type distributions. Unlike existing methods, we assume firms only observe…
This study investigates whether international equity markets systematically price global macroeconomic risks. The empirical analysis is conducted using monthly excess returns for ten G20 countries over the period 2000-2024. A Dynamic Factor…
Financial markets are a typical example of complex systems where interactions between constituents lead to many remarkable features. Here, we show that a pairwise maximum entropy model (or auto-logistic model) is able to describe switches…
As a specific proportional hazard rates model, sequential order statistics can be used to describe the lifetimes of load-sharing systems. Inference for these systems needs to account for small sample sizes, which are prevalent 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…
Affine term structure models have gained significant attention in the finance literature, mainly due to their analytical tractability and statistical flexibility. The aim of this article is to present both theoretical foundations as well as…
This paper presents a convenient framework for modeling default process and pricing derivative securities involving credit risk. The framework provides an integrated view of credit valuation adjustment by linking distance-to-default,…
Power grids are moving towards 100% renewable energy source bulk power grids, and the overall dynamics of power system operations and electricity markets are changing. The electricity markets are not only dispatching resources economically…
Measuring model risk is required by regulators on financial and insurance markets. We separate model risk into parameter estimation risk and model specification risk, and we propose expected shortfall type model risk measures applied to…
Financial models do not merely analyse markets, but actively shape them. This effect, known as performativity, describes how financial theories and the subsequent actions based on them influence market processes, by creating self-fulfilling…
In this paper we develop a tractable structural model with analytical default probabilities depending on some dynamics parameters, and we show how to calibrate the model using a chosen number of Credit Default Swap (CDS) market quotes. We…
We consider a financial market with zero-coupon bonds that are exposed to credit and liquidity risk. We revisit the famous Jarrow & Turnbull setting in order to account for these two intricately intertwined risk types. We utilise the…
We propose confidence regions for the parameters of incomplete models with exact coverage of the true parameter in finite samples. Our confidence region inverts a test, which generalizes Monte Carlo tests to incomplete models. The test…
Analytical, free of time consuming Monte Carlo simulations, framework for credit portfolio systematic risk metrics calculations is presented. Techniques are described that allow calculation of portfolio-level systematic risk measures…
Statistical physics of complex systems exploits network theory not only to model, but also to effectively extract information from many dynamical real-world systems. A pivotal case of study is given by financial systems: market prediction…
We study the pricing of credit derivatives with asymmetric information. The managers have complete information on the value process of the firm and on the default threshold, while the investors on the market have only partial observations,…
We investigate the general structure of optimal investment and consumption with small proportional transaction costs. For a safe asset and a risky asset with general continuous dynamics, traded with random and time-varying but small…