A Jump-Diffusion Nominal Short Rate Model

2010 ◽  
Author(s):  
Sami Attaoui ◽  
Pierre Six
Keyword(s):  
Jump Diffusion ◽  
Rate Model

scholarly journals Pricing of Embedded Options in Bank Deposits and Loans Based on Jump-Diffusion Interest Rate Model

Complexity ◽  
2021 ◽  
Vol 2021 ◽  
pp. 1-15
Author(s):  
Enlin Tang ◽  
Song Xu
Keyword(s):  
Interest Rate ◽  
Commercial Banks ◽  
Jump Diffusion ◽  
Interest Rate Risk ◽  
Rate Model ◽  
Interest Rate Marketization ◽  
Interest Rate Model ◽  
Embedded Options ◽  
The Interest Rate ◽  
Interest Margin

The marketization of interest rate is an inevitable requirement for China’s financial reform and joining the WTO to connect with the international financial market. It is also an important link to improve the marketization degree of China’s financial system. The marketization of interest rate in China is gradually advancing according to its preset mode. In the process of interest rate marketization, an unavoidable problem is that while the interest rate marketization gives the commercial banks the autonomy of capital pricing, the fluctuation of interest rate is more and more frequent. However, due to the fluctuation of interest rate, the loan as the main assets of commercial banks will be prepayed by borrowers, and the time deposit as the main liabilities of commercial banks will be withdrawn by depositors in advance; that is, embedded options are implied in asset liability items, which makes it difficult for commercial banks to accurately calculate the actual interest margin of deposits and loans and manage the interest rate risk. Therefore, it is of great significance to identify and price such embedded option value. On the basis of identifying and decomposing the embedded options in deposit and loan of commercial banks, according to the change characteristics of deposit and loan interest rate of Chinese commercial banks, this paper chooses jump-diffusion interest rate model to describe the change of benchmark interest rate of deposit and loan in China and demonstrates the advantages of this model compared with other models. Based on Monte Carlo simulation technology, the embedded options of five-year fixed deposit and ten-year prepayable loan in China are priced. On this basis, it points out that the real interest margin of commercial bank’s deposit and loan should be the nominal interest margin minus the value of deposit and loan’s embedded options. In the process of interest rate risk management, we should pay attention to the existence of embedded options and carry out effective management.

AN ARITHMETIC PURE-JUMP MULTI-CURVE INTEREST RATE MODEL

2019 ◽  
Vol 22 (08) ◽  
pp. 1950042
Author(s):  
MARKUS HESS
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Jump Diffusion ◽  
Rate Model ◽  
Single Curve ◽  
Curve Model ◽  
Interest Rate Model ◽  
Libor Rate ◽  
Future Information

We propose a multi-curve model involving interest rates and spreads which are modeled by arithmetic martingale processes being larger than some arbitrarily chosen constant. Under our mean-reverting pure-jump approach, we derive tractable martingale representations for the OIS rate, the spread, as well as the LIBOR rate, and provide analytical caplet price formulae. In a second part, we introduce an extended jump-diffusion version of our model and investigate hedging and the computation of Greeks under this new specification. As a by-product, we infer the related arithmetic pure-jump single-curve model. We finally consider the modeling of future information in multi-curve interest rate markets by enlarged filtrations and deduce the related OIS and LIBOR rate representations as well as the corresponding information premium.

Improved Aero/Hydro Flow-Rate Model Using Acoustics

2018 ◽  
Vol 59 (4) ◽  
pp. 429-438
Author(s):  
Muralidhar Seshadri ◽  
◽  
Jonathan B. Freund ◽  
Pranab N. Jha ◽  
Atchyuta Ramayya Venna ◽  
...  
Keyword(s):  
Flow Rate ◽  
Rate Model
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