Unspanned Stochastic Volatility Term Structure Model Applied in Negative Interest Rate Environment

2015 ◽  
Author(s):  
Jan Sedlak
Keyword(s):  
Interest Rate ◽  
Stochastic Volatility ◽  
Term Structure ◽  
Structure Model ◽  
Term Structure Model ◽  
Rate Environment

BOND MARKET MODEL

2006 ◽  
Vol 09 (04) ◽  
pp. 577-596 ◽  
Author(s):  
ROBERTO BAVIERA
Keyword(s):  
Interest Rate ◽  
Term Structure ◽  
Bond Market ◽  
Market Model ◽  
Structure Model ◽  
Over The Counter ◽  
Term Structure Model ◽  
Libor Market Model ◽  
Bond Options ◽  
Interest Rate Term Structure

We describe the Bond Market Model, a multi-factor interest rate term structure model, where it is possible to price with Black-like formulas the three classes of over-the-counter plain vanilla options. We derive the prices of caps/floors, bond options and swaptions. A comparison with Libor Market Model and Swap Market Model is discussed in detail, underlining advantages and limits of the different approaches.

scholarly journals Estimating the Monetary Policy Measures of Japan in Shadow/ZLB Term Structure Model

2019 ◽  
Vol 6 (6) ◽  
pp. 126
Author(s):  
Rui WANG
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Term Structure ◽  
Yield Curve ◽  
Quantitative Measure ◽  
Structure Model ◽  
Term Structure Model ◽  
Bond Yield ◽  
Public Expectation ◽  
Policy Measures

In this paper, we follow the estimation methodology proposed by Krippner (2015) and use Japanese government bond yield curve data to estimate a shadow/ZLB term structure model. This model provides three estimated monetary policy measures, SSR, ETZ and EMS, which can be used to gauge the stance of monetary in a consistent way in both ZLB and non-ZLB environment. Japan has experienced a long period of the ZLB since 1999. The policy rate has already lost its function as an appropriate quantitative measure of monetary policy. The SSR estimated from the shadow/ZLB term structure model can evolve to negative level in the ZLB environment and provide consistent view of the stance of monetary policy as the positive short policy interest rate dose in the normal non-ZLB environment. The ETZ answers the question that how long the short interest rate will be expected to be restricted by the ZLB, which can be useful for the central bank as a reference for exit strategy of unconventional monetary easing or forward guidance on public expectation formation. The EMS measures the stance of monetary policy, relatively tight or relatively loose, in a consistent and comparable way under both ZLB and non-ZLB environment. The analysis shows that all three measures exhibit very good traceability of monetary policy in Japan, which can also be used as the proxy variables for the stance of monetary policy in other econometric procedures for policy evaluation.

Martingales versus PDEs in finance: an equivalence result with examples

2000 ◽  
Vol 37 (04) ◽  
pp. 947-957 ◽  
Author(s):  
David Heath ◽  
Martin Schweizer
Keyword(s):  
Stochastic Volatility ◽  
Term Structure ◽  
Sufficient Conditions ◽  
Stochastic Volatility Model ◽  
Structure Model ◽  
Term Structure Model ◽  
Volatility Model ◽  
Equivalence Result

We provide a set of verifiable sufficient conditions for proving in a number of practical examples the equivalence of the martingale and the PDE approaches to the valuation of derivatives. The key idea is to use a combination of analytic and probabilistic assumptions that covers typical models in finance falling outside the range of standard results from the literature. Applications include Heston's stochastic volatility model and the Black-Karasinski term structure model.

Pricing electricity swaptions under a stochastic volatility term structure model

2013 ◽  
Vol 6 (4) ◽  
pp. 43-67
Author(s):  
Rikard Green ◽  
Karl Larsson ◽  
Marcus Nossman
Keyword(s):  
Stochastic Volatility ◽  
Term Structure ◽  
Structure Model ◽  
Term Structure Model

A One-Factor Shifted Squared Gaussian Term Structure Model for Interest Rate Modeling

2015 ◽  
Vol 25 (3) ◽  
pp. 36-45 ◽  
Author(s):  
Vincenzo Russo ◽  
Frank J. Fabozzi
Keyword(s):  
Interest Rate ◽  
Term Structure ◽  
Structure Model ◽  
Term Structure Model
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