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A Two Mean Reverting Factor Model Of The Term Structure Of Interest Rates
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Book Synopsis A Two-mean Reverting-factor Model of the Term Structure of Interest Rates by : Manuel Moreno (Economista)
Download or read book A Two-mean Reverting-factor Model of the Term Structure of Interest Rates written by Manuel Moreno (Economista) and published by . This book was released on 1997 with total page 57 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis A Two-mean Reverting-factor Model of the Term Structure of Interest Rates by : Manuel Moreno
Download or read book A Two-mean Reverting-factor Model of the Term Structure of Interest Rates written by Manuel Moreno and published by . This book was released on 1996 with total page 57 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis A Two Factor No-Arbitrage Model of the Term Structure of Interest Rates by : T.S. Ho
Download or read book A Two Factor No-Arbitrage Model of the Term Structure of Interest Rates written by T.S. Ho and published by . This book was released on 2008 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: We derive a no-arbitrage model of the term structure in which any two futures rates act as factors. The term structure shifts and tilts as the factor rates vary. The cross-sectional properties of the model derive from the solution of a two-dimensional ARMA process for the short rate which exhibits mean reversion and a lagged memory parameter. We show that the correlation of the factor rates is restricted by the no-arbitrage conditions of the model. Hence in a multiple-factor model it is not valid to independently choose both the mean reversion, volatility and correlation parameters. The term-structure model, derived here, can be used to value options on bonds and swaps or to generate term structure scenarios for the risk management of portfolios of interest-rate derivatives.
Book Synopsis Essays on the Term Structure of Interest Rates by : Wei Shi
Download or read book Essays on the Term Structure of Interest Rates written by Wei Shi and published by . This book was released on 1995 with total page 198 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis On a General Class of One-Factor Models for the Term Structure of Interest Rates by : Wolfgang M. Schmidt
Download or read book On a General Class of One-Factor Models for the Term Structure of Interest Rates written by Wolfgang M. Schmidt and published by . This book was released on 1997 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We propose a general one-factor model for the term structure of interest rates which is based upon a model for the short rate. The dynamics of the short rate is described by an appropriate function of a time changed Wiener process. The model allows for perfect fitting of given term structure of interest rates and volatilities, as well as for mean reversion. Moreover, every type of distribution of the short rate can be achieved, in particular, the distribution can be concentrated on an interval. The model includes several popular models such as the generalized Vasicek (or Hull- White) model, the Black-Derman-Toy, Black-Karasinski model, and others. There is a unified numerical approach to the general model based on a simple lattice approximation which, in particular, can be chosen as a binomial or N-nomial lattice with branching probabilities 1/N.
Book Synopsis The Term Structure of Interest-Rate Future Prices by : Richard C. Stapleton
Download or read book The Term Structure of Interest-Rate Future Prices written by Richard C. Stapleton and published by . This book was released on 2008 with total page 51 pages. Available in PDF, EPUB and Kindle. Book excerpt: We derive general properties of two-factor models of the term structure of interest rates and, in particular, the process for futures prices and rates. Then, as a special case, we derive a no-arbitrage model of the term structure in which any two futures rates act as factors. The term structure shifts and tilts as the factor rates vary. The cross-sectional properties of the model derive from the solution of a two-dimensional autoregressive process for the short-term rate, which exhibits both mean reversion and a lagged persistence parameter. We show that the correlation of the futures rates is restricted by the no-arbitrage conditions of the model. In addition, we investigate the determinants of the volatility of the futures rates of various maturities. These are shown to be related to the volatilities of the short rate, the volatility of the second factor, the degree of mean reversion and the persistence of the second factor shock. We obtain specific results for futures rates in the case where the logarithm of the short-term rate [e.g., the London Inter-Bank Offer Rate (Libor)] follows a two-dimensional process. Our results lead to empirical hypotheses that are testable using data from the liquid market for Eurocurrency interest rate futures contracts.
Book Synopsis The Term Structure of Interest-rate Futures Prices by : Richard C. Stapleton
Download or read book The Term Structure of Interest-rate Futures Prices written by Richard C. Stapleton and published by . This book was released on 2000 with total page 65 pages. Available in PDF, EPUB and Kindle. Book excerpt: We derive general properties of two-factor models of the term structure of interest rates and, in particular, the process for futures prices and rates. Then, as a special case, we derive a no-arbitrage model of the term structure in which any two futures rates act as factors. In this model, the term structure shifts and tilts as the factor rates vary. The cross-sectional properties of the model derive from the solution of a two-dimensional, autoregressive process for the short-term rate, which exhibits both mean-reversion and a lagged persistence parameter. We show that the correlation of the futures rates is restricted by the no-arbitrage conditions of the model. In addition, we investigate the determinants of the volatilities and the correlations of the futures rates of various maturities. These are shown to be related to the volatility of the short rate, the volatility of the second factor, the degree of mean-reversion and the persistence of the second factor shock. We also discuss the extension of our model to three or more factors. We obtain specific results for futures rates in the case where the logarithm of the short-term rate [e.g., the London Inter-Bank Offer Rate LIBOR follows a two-dimensional process. Our results lead to empirical hypotheses that are testable using data from the liquid market for Eurocurrency interest rate futures contracts.
Book Synopsis Some Models of the Term Structure of Interest Rates by : Robert Sterling Goldstein
Download or read book Some Models of the Term Structure of Interest Rates written by Robert Sterling Goldstein and published by . This book was released on 1996 with total page 194 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Pricing Interest Rate Derivatives in a Non-parametric Two-factor Term-structure Model by : John L. Knight
Download or read book Pricing Interest Rate Derivatives in a Non-parametric Two-factor Term-structure Model written by John L. Knight and published by . This book was released on 1999 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt: Proposes a non-parametric two-factor term-structure model that imposes no restrictions on the functional forms of the diffusion functions.
Book Synopsis Modeling the Term Structure of Interest Rates by : Rajna Gibson
Download or read book Modeling the Term Structure of Interest Rates written by Rajna Gibson and published by Now Publishers Inc. This book was released on 2010 with total page 171 pages. Available in PDF, EPUB and Kindle. Book excerpt: Modeling the Term Structure of Interest Rates provides a comprehensive review of the continuous-time modeling techniques of the term structure applicable to value and hedge default-free bonds and other interest rate derivatives.
Book Synopsis Real Options Valuation by : Marcus Schulmerich
Download or read book Real Options Valuation written by Marcus Schulmerich and published by Springer Science & Business Media. This book was released on 2005-12-08 with total page 367 pages. Available in PDF, EPUB and Kindle. Book excerpt: Managerial decision-making during the lifetime of a project can have im portant implications on project handling and its contribution to shareholder value. Traditional capital budgeting methods (in particular methods based on net present value) fail to capture the role of managerial degrees of free dom and therefore tend to lead to a systematic undervaluation of the project. In contrast, the real options approach to investment analysis characterizes decision-making flexibility in terms of (real) option rights which can be eval uated analogously to financial options using contingent-claims pricing tech niques widely used in capital markets. The research carried out by Marcus Schulmerich analyzes real options for n- constant and stochastic interest rates versus constant interest rates. Analyzing stochastic interest rates in the context of real options valuation is of particular relevance given their long time to maturity which makes them more vulnera ble to interest rate risk than short-term financial options. To date, there has not been a comprehensive review of this issue in the academic literature. The fact that interest rates have fiuctuated widely over the recent years further highlights the need for studying this issue.
Book Synopsis Modeling and Simulating Interest Rates Via Time-dependent Mean Reversion by : Andrew Jason Dweck
Download or read book Modeling and Simulating Interest Rates Via Time-dependent Mean Reversion written by Andrew Jason Dweck and published by . This book was released on 2014 with total page 58 pages. Available in PDF, EPUB and Kindle. Book excerpt: The purpose of this thesis is to compare the effectiveness of several interest rate models in fitting the true value of interest rates. Up until 1990, the universally accepted models were the equilibrium models, namely the Rendleman{Bartter model, the Vasicek model, and the Cox{Ingersoll{Ross (CIR) model. While these models were probably considered relatively accurate around the time of their discovery, they do not provide a good fit to the initial term structure of interest rates, making them substandard for use by traders in pricing interest rate options. The fourth model we consider is the Hull{White one-factor model, which does provide this fit. After calibrating, simulating, and comparing these four models, we findnd that the Hull{White model gives the best fit to our data sets.
Book Synopsis Term Structure of Interest Rates with Regime Shifts by : Ravi Bansal
Download or read book Term Structure of Interest Rates with Regime Shifts written by Ravi Bansal and published by . This book was released on 2001 with total page 70 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis An Econometric Model of the Term Structure of Interest Rates Under Regime-Switching Risk by : Shu Wu
Download or read book An Econometric Model of the Term Structure of Interest Rates Under Regime-Switching Risk written by Shu Wu and published by . This book was released on 2008 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper develops and estimates a continuous-time model of the term structure of interests under regime shifts. The model features an analytically simple representation of Markov regime shifts that helps elucidate the effect of regime shifts on the yield curve and give a clear interpretation of regime-switching risk premiums. The model falls within the broad class of essentially affine models with a closed form solution of the yield curve, yet it is flexible enough to accommodate priced regime-switching risk, time-varying transition probabilities, regime-dependent mean reversion coefficients as well as stochastic volatilities within each regime. A two-factor version of the model is implemented using Efficient Method of Moments. Empirical results show that the model can account for many salient features of the yield curve in the U.S.
Book Synopsis Valuation of derivative assets under cyclical mean-reversion processes for spot prices by : Federico Daniel Platania
Download or read book Valuation of derivative assets under cyclical mean-reversion processes for spot prices written by Federico Daniel Platania and published by Ed. Universidad de Cantabria. This book was released on 2016-01-08 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis studies the stochastic behaviour of interest rates and commodity prices, extending the existing literature by allowing the underlying state variable to capture any possible seasonal or cyclical behaviour. In the first chapter, we propose a new model for the term structure of interest rates assuming that the instantaneous spot rate converges to a cyclical long-term level characterized by a Fourier series. Under this framework, we derive analytical expressions for the valuation of bonds and several interest rate derivative assets. The second chapter introduces a new square-root model for the yield curve where both the mean reversion level and the volatility are described by a harmonic oscillator. This model specification incorporates a good deal of flexibility preserving the analytical tractability. In the final chapter, we present a model for the logarithm of the commodity spot price with a reversion to a time dependent long-run level described by a Fourier series, obtaining closed-form expressions for a wide range of derivatives and study the fitting performance to market data.
Book Synopsis Interest Rate Modeling for Risk Management: Market Price of Interest Rate Risk (Second Edition) by : Takashi Yasuoka
Download or read book Interest Rate Modeling for Risk Management: Market Price of Interest Rate Risk (Second Edition) written by Takashi Yasuoka and published by Bentham Science Publishers. This book was released on 2018-05-09 with total page 325 pages. Available in PDF, EPUB and Kindle. Book excerpt: Interest Rate Modeling for Risk Management presents an economic model which can be used to compare interest rate and perform market risk assessment analyses. The key interest rate model applied in this book is specified under real-world measures, and the result is used as to generate scenarios for interest rates. The book introduces a theoretical framework that allows estimating the market price of interest rate risk. For this, the book starts with a brief explanation of stochastic analysis, and introduces interest rate models such as Heath-Jarrow-Morton, Hull-White and LIBOR models. The real-world model is then introduced in subsequent chapters. Additionally, the book also explains some properties of the real-world model, along with the negative price tendency of the market price for risk and a positive market price of risk (with practical examples). Readers will also find a handy appendix with proofs to complement the numerical methods explained in the book. This book is intended as a primer for practitioners in financial institutions involved in interest rate risk management. It also presents a new perspective for researchers and graduates in econometrics and finance on the study of interest rate models. The second edition features an expanded commentary on real world models as well as additional numerical examples for the benefit of readers.
Book Synopsis Risk Management and Simulation by : Aparna Gupta
Download or read book Risk Management and Simulation written by Aparna Gupta and published by CRC Press. This book was released on 2016-04-19 with total page 518 pages. Available in PDF, EPUB and Kindle. Book excerpt: The challenges of the current financial environment have revealed the need for a new generation of professionals who combine training in traditional finance disciplines with an understanding of sophisticated quantitative and analytical tools. Risk Management and Simulation shows how simulation modeling and analysis can help you solve risk managemen
