Adaptive Interest Rate Modelling

Interest Rate Modelling

Spot Rate Models 3 Equivalent Martingale Measure (Reference Only) . . . . . . . . . . . . . . . . . . 3 Spot Rate Models: Ideas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 The Bond Price Equation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Inversion of the Yield Curve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Affine Term Structure Mo...

A chaotic approach to interest rate modelling

This paper presents a new approach to interest rate dynamics. We consider the general family of arbitrage-free positive interest rate models, valid on all time horizons, in the case of a discount bond system driven by a Brownian motion of one or more dimensions. We show that the space of such models admits a canonical mapping to the space of square-integrable Wiener functionals. This is achieve...

Macroeconomics in interest rate term structure modelling

This thesis uses a literature review to describe the latest progress in the models used to describe interest rate term structure (TS). The thesis emphasises macroeconomic variables and models, as these elements have become an essential part of TS modelling in the 21 st century. Although this type of literature review has not been conducted before, the rapid development of numerous kinds of mode...

Stochastic interest rate modelling with continuous-time GARCH(1,1) model

There is a massive amount of study deals with the stochastic modelling of the interest rates. The first approach to specify the interest rate movements as continuoustime Ito process was introduced by Merton in 1973. But his approach had many shortcomings including possibility of negative interest rates. In his seminal work in 1977, Vasicek developed Merton’s model by introducing mean-reverting ...

KIER DISCUSSION PAPER SERIES Discrete-Time Interest Rate Modelling