scholarly journals ON THE YIELD OF AN INTEREST RATE MODEL CALIBRATED WITH CURRENT TERM STRUCTURE

2016 ◽  
Vol 108 (2) ◽  
Author(s):  
M.M. Chawla
Keyword(s):  
Interest Rate ◽  
Term Structure ◽  
Rate Model ◽  
Current Term ◽  
Interest Rate Model

scholarly journals A General Gaussian Interest Rate Model Consistent with the Current Term Structure

2012 ◽  
Vol 2012 ◽  
pp. 1-16 ◽  
Author(s):  
Marco Di Francesco
Keyword(s):  
Interest Rate ◽  
Term Structure ◽  
Goodness Of Fit ◽  
Rate Model ◽  
Credit Crisis ◽  
Interest Rate Models ◽  
Deterministic Function ◽  
Current Term ◽  
Critical Issues ◽  
Interest Rate Model

We describe an extension of Gaussian interest rate models studied in literature. In our model, the instantaneous spot rate is the sum of several correlated stochastic processes plus a deterministic function. We assume that each of these processes has a Gaussian distribution with time-dependent volatility. The deterministic function is given by an exact fitting to observed term structure. We test the model through various numeric experiments about the goodness of fit to European swaptions prices quoted in the market. We also show some critical issues on calibration of the model to the market data after the credit crisis of 2007.

A COMPLETE YIELD CURVE DESCRIPTION OF A MARKOV INTEREST RATE MODEL

2003 ◽  
Vol 06 (04) ◽  
pp. 317-326 ◽  
Author(s):  
ROBERT J. ELLIOTT ◽  
ROGEMAR S. MAMON
Keyword(s):  
Interest Rate ◽  
Term Structure ◽  
Yield Curve ◽  
Forward Rate ◽  
Rate Model ◽  
Bond Price ◽  
Forward Measure ◽  
Expectation Hypothesis ◽  
Complete Set ◽  
Interest Rate Model

This paper aims to present a complete term structure characterisation of a Markov interest rate model. To attain this objective, we first give a proof that establishes the Unbiased Expectation Hypothesis (UEH) via the forward measure. The UEH result is then employed, which considerably facilitates the calculation of an explicit analytic expression for the forward rate f(t, T). The specification of the bond price P(t, T), yield rate Y(t, T) and f(t, T) gives a complete set of yield curve descriptions for an interest rate market where the short rate r is a function of a continuous time Markov chain.

scholarly journals DC Pension Plan with Refund of Contributions under Affine Interest Rate Model

2020 ◽  
pp. 1-16
Author(s):  
Udeme O. Ini ◽  
Obinichi C. Mandah ◽  
Edikan E. Akpanibah
Keyword(s):  
Interest Rate ◽  
Optimal Investment ◽  
Hjb Equation ◽  
Pension Scheme ◽  
Theoretic Approach ◽  
Rate Model ◽  
Risky Assets ◽  
Investment Plan ◽  
Interest Rate Model ◽  
The Impact

This paper studies the optimal investment plan for a pension scheme with refund of contributions, stochastic salary and affine interest rate model. A modified model which allows for refund of contributions to death members’ families is considered. In this model, the fund managers invest in a risk free (treasury) and two risky assets (stock and zero coupon bond) such that the price of the risky assets are modelled by geometric Brownian motions and the risk free interest rate is of affine structure. Using the game theoretic approach, an extended Hamilton Jacobi Bellman (HJB) equation which is a system of non linear PDE is established. Furthermore, the extended HJB equation is then solved by change of variable and variable separation technique to obtain explicit solutions of the optimal investment plan for the three assets using mean variance utility function. Finally, theoretical analyses of the impact of some sensitive parameters on the optimal investment plan are presented.

scholarly journals Nonparametric estimation and specification testing of a two-factor interest rate model

2021 ◽  
Author(s):  
Brennan Scott Thompson
Keyword(s):  
Interest Rate ◽  
Nonparametric Estimation ◽  
Rate Model ◽  
Specification Testing ◽  
Interest Rate Model

Nonparametric estimation and specification testing of a two-factor interest rate model

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