Entropy and information in the interest rate term structure

2002 ◽  
Vol 2 (1) ◽  
pp. 70-80 ◽  
Author(s):  
D C Brody ◽  
L P Hughston
Keyword(s):  
Interest Rate ◽  
Term Structure ◽  
Interest Rate Term Structure ◽  
The Interest Rate

scholarly journals VALUATION OF GUARANTEED ANNUITY OPTIONS IN AFFINE TERM STRUCTURE MODELS

2007 ◽  
Vol 10 (02) ◽  
pp. 363-387 ◽  
Author(s):  
CHI CHIU CHU ◽  
YUE KUEN KWOK
Keyword(s):  
Interest Rate ◽  
Term Structure ◽  
Analytic Approximation ◽  
Approximation Methods ◽  
Term Structure Model ◽  
Stochastic Duration ◽  
Payoff Structure ◽  
Interest Rate Term Structure ◽  
The Interest Rate ◽  
The One

We propose three analytic approximation methods for numerical valuation of the guaranteed annuity options in deferred annuity pension policies. The approximation methods include the stochastic duration approach, Edgeworth expansion, and analytic approximation in affine diffusions. The payoff structure in the annuity policies is similar to a quanto call option written on a coupon-bearing bond. To circumvent the limitations of the one-factor interest rate model, we model the interest rate dynamics by a two-factor affine interest rate term structure model. The numerical accuracy and the computational efficiency of these approximation methods are analyzed. We also investigate the value sensitivity of the guaranteed annuity option with respect to different parameters in the pricing model.

scholarly journals Shape Evolution of the Interest Rate Term Structure

2021 ◽  
Vol 13 (3) ◽  
Author(s):  
Biwei Chen
Keyword(s):  
Interest Rate ◽  
Term Structure ◽  
Yield Curve ◽  
Yield Spread ◽  
Shape Evolution ◽  
Curve Shape ◽  
Yield Spreads ◽  
Novel Approach ◽  
Interest Rate Term Structure ◽  
The Interest Rate

This paper adopts a novel approach to studying the evolution of interest rate term structure over the U.S. business cycles and to predicting recessions. Applying an effective algorithm, I classify the Treasury yield curve into distinct shapes and find the less frequent shapes intrinsically linked to the recessions in the post-WWII data. In forecasting recessions, the median-short yield spread trumps the long-short spread for horizons up to 17 months ahead and the yield curve shape is nearly impressive as the median-short spread. Overall, the yield curve shape is an informative but more succinct indicator than the spreads in studying the term structure. Key words: Business cycle, recession forecast, U.S. Treasury yield curve, yield spreads.

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