scholarly journals A No-Arbitrage Analysis of Economic Determinants of the Credit Spread Term Structure

2005 ◽  
Vol 2005 (59) ◽  
pp. 1-48 ◽  
Author(s):  
Liuren Wu ◽  
◽  
Frank X. Zhang
Keyword(s):  
Term Structure ◽  
Credit Spread ◽  
Economic Determinants ◽  
No Arbitrage

Nearly Exact Bayesian Estimation of Non-linear No-Arbitrage Term-Structure Models*

2021 ◽  
Author(s):  
Marcello Pericoli ◽  
Marco Taboga
Keyword(s):  
Bayesian Estimation ◽  
Term Structure ◽  
Broad Class ◽  
Model Parameters ◽  
State Variables ◽  
Computationally Efficient ◽  
Macroeconomic Factors ◽  
No Arbitrage ◽  
Term Structure Models ◽  
Non Linear

Abstract We propose a general method for the Bayesian estimation of a very broad class of non-linear no-arbitrage term-structure models. The main innovation we introduce is a computationally efficient method, based on deep learning techniques, for approximating no-arbitrage model-implied bond yields to any desired degree of accuracy. Once the pricing function is approximated, the posterior distribution of model parameters and unobservable state variables can be estimated by standard Markov Chain Monte Carlo methods. As an illustrative example, we apply the proposed techniques to the estimation of a shadow-rate model with a time-varying lower bound and unspanned macroeconomic factors.

No-Arbitrage Modeling of Structured Products with Economic Determinants

2015 ◽  
Author(s):  
Yong Seok Choi ◽  
Hitesh Doshi ◽  
Kris Jacobs ◽  
Stuart M. Turnbull
Keyword(s):  
Economic Determinants ◽  
No Arbitrage ◽  
Structured Products

No-Arbitrage Approach to Pricing Credit Spread Derivatives

2003 ◽  
Vol 10 (3) ◽  
pp. 51-64 ◽  
Author(s):  
Chi Chiu Chu ◽  
Yue Kuen Kwok
Keyword(s):  
Credit Spread ◽  
No Arbitrage

Yield Curves, Swap Curves, and Term Structure of Interest Rates

2019 ◽  
pp. 203-228
Author(s):  
Tom P. Davis ◽  
Dmitri Mossessian
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Term Structure ◽  
Yield Curve ◽  
Yield Curves ◽  
No Arbitrage ◽  
Interest Rate Swap ◽  
The Interest Rate ◽  
Rate Swap ◽  
The U.S

This chapter discusses multiple definitions of the yield curve and provides a conceptual understanding on the construction of yield curves for several markets. It reviews several definitions of the yield curve and examines the basic principles of the arbitrage-free pricing as they apply to yield curve construction. The chapter also reviews cases in which the no-arbitrage assumption is dropped from the yield curve, and then moves to specifics of the arbitrage-free curve construction for bond and swap markets. The concepts of equilibrium and market curves are introduced. The details of construction of both types of the curve are illustrated with examples from the U.S. Treasury market and the U.S. interest rate swap market. The chapter concludes by examining the major changes to the swap curve construction process caused by the financial crisis of 2007–2008 that made a profound impact on the interest rate swap markets.

scholarly journals GENERAL ANALYSIS OF LONG-TERM INTEREST RATES

2020 ◽  
Vol 23 (01) ◽  
pp. 2050002
Author(s):  
FRANCESCA BIAGINI ◽  
ALESSANDRO GNOATTO ◽  
MAXIMILIAN HÄRTEL
Keyword(s):  
Interest Rates ◽  
Term Structure ◽  
Applied Mathematics ◽  
Mathematical Finance ◽  
Rational Model ◽  
No Arbitrage ◽  
Working Paper ◽  
Social Discounting ◽  
The Relationship

We introduce here the idea of a long-term swap rate, characterized as the fair rate of an overnight indexed swap (OIS) with infinitely many exchanges. Furthermore, we analyze the relationship between the long-term swap rate, the long-term yield, (F. Biagini, A. Gnoatto & M. Härtel (2018) Affine HJM Framework on [Formula: see text] and long-term yield, Applied Mathematics and Optimization 77 (3), 405–441, F. Biagini & M. Härtel (2014) Behavior of long-term yields in a lévy term structure, International Journal of Theoretical and Applied Finance 17 (3), 1–24, N. El Karoui, A. Frachot & H. Geman (1997) A note on the behavior of long zero coupon rates in a no arbitrage framework. Working Paper. Available at Researchgate: https://www.researchgate.net/publication/5066730) , and the long-term simple rate (D. C. Brody & L. P. Hughston (2016) Social discounting and the long rate of interest, Mathematical Finance 28 (1), 306–334) as long-term discounting rate. Finally, we investigate the existence of these long-term rates in two-term structure methodologies, the Flesaker–Hughston model and the linear-rational model. A numerical example illustrates how our results can be used to estimate the nonoptional component of a CoCo bond.

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