In this paper, we investigate the contribution of interest rate structured bonds to portfolios risk-averse retail investors. We conduct our analysis by simulating term structure according a multifactor no-arbitrage model and comparing performance portfolio consisting basic products (zero-coupon bonds, coupon floating notes) with containing more sophisticated exotic (like constant maturity swaps...

Interbank lending rate is the main benchmark interest in domestic currency market, looking for an appropriate financial time series model to describe its stochastic fluctuation process, and choosing risk measurement method measure interbank risk. The management of market has great theoretical practical significance. This article aimed at studying based on embedded sensor network proposes key te...

We investigate a portfolio optimization problem under the threat of a market crash, where the interest rate of the bond is modeled as a Vasicek process, which is correlated with the stock price process. We adopt a non-probabilistic worst-case approach for the height and time of the market crash. On a given time horizon [0, T ], we then maximize the investor’s expected utility of terminal wealth...

This paper analyzes how model misspecification associated with both interest rate and mortality risk influences hedging decisions of insurance companies. For this purpose, diverse risk management strategies which are risk–minimizing when model risk is ignored come into consideration. The effectiveness of these strategies is investigated by looking at the distribution of the resulting hedging er...

We show that in stark contrast to conventional wisdom, maturity transformation does not expose banks to significant interest rate risk. Aggregate net interest margins have been near-constant over 1955–2013, despite substantial maturity mismatch and wide variation in interest rates. We argue that this is due to banks’ market power in deposit markets. Market power allows banks to pay deposit rate...

MARCH 2003 THE JOURNAL OF FIXED INCOME 81 V alue at risk modelers face difficult trade-offs in choosing between the two major VaR methodologies: historical/ Monte Carlo simulations or parametric models. The historical approach uses the recent history of the asset price (or, for derivatives, the price of the underlying), while the parametric approach imposes functional form assumptions upon the ...