2 edition of **Pricing interest rate derivatives in a non-parametric two-factor term-structure model** found in the catalog.

Pricing interest rate derivatives in a non-parametric two-factor term-structure model

John L. Knight

- 52 Want to read
- 12 Currently reading

Published
**1999** by Bank of Canada in [Ottawa] .

Written in English

**Edition Notes**

Statement | by John Knight, Fuchun Li, Mingwei Yuan. |

Series | Bank of Canada working paper -- 99-19, Working paper (Bank of Canada) -- 99-19. |

Contributions | Li, Fu-chʻun., Yuan, Mingwei, 1965-, Bank of Canada. |

The Physical Object | |
---|---|

Pagination | vi, 46 p. : |

Number of Pages | 46 |

ID Numbers | |

Open Library | OL18922860M |

ISBN 10 | 0662283279 |

Q&A for finance professionals and academics. I am trying to simulate future hourly spot prices via the below two-factor mean reverting (short/long term) energy price model (D. Pilipovic: Energy Risk 2nd Edition, , chapter:5, page: ). A limit order book model for latency arbitrage Samuel N. Cohen and Lukasz Szpruch Bridge Copula Model for Option Pricing Giuseppe Campolieti, Roman N. Makarov and Andrey Vasiliev Anti-Robust and Tonsured Statistics Martin Goldberg Calculating Variable Annuity Liability 'Greeks' Using Monte Carlo Simulation. Full text of "Statistical analysis of financial data in S-PLUS" See other formats. This paper estimates both parametric and non-parametric proportional hazards models for a subset of Canadian mortgage-backed security data. The estimated parametric hazard function is then used to drive exogenous prepayments within an arbitrage-free model of the term structure of interest rates. Theoretical prices as well as option-adjusted spreads (OAS) are obtained for three different.

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Get this from a library. Pricing interest rate derivatives in a non-parametric two-factor term-structure model. [John L Knight; Bank of Canada.] -- Proposes a non-parametric two-factor term-structure model that imposes no restrictions on the functional forms of the diffusion functions.

Get this from a library. Pricing interest rate derivatives in a non-parametric two-factor term-structure model. [John L Knight; Bank of Canada.]. Finally, we compare various interest rate bond option pricing models, in their ability to price interest rate derivatives and manage and interest rate risk.

We compare three approaches to pricing interest rate derivatives: spot rate (e.g., CIR), forward-rate (i.e., HJM), and non-parametric models (e.g., multivariate kernel estimation.)Cited by: 2. Non-Parametric Pricing of Interest Rates Options and there are numerical diﬃculties in the estimation of these models, as discussed, for example, in Duﬀee and Stanton ().

John Knight & Fuchun Li & Mingwei Yuan, "Pricing Interest Rate Derivatives in a Non-Parametric Two-Factor Term-Structure Model," Staff Working PapersBank of Canada. Singh, Radhey S.

& Ullah, Aman, Improving the term structure of interest rates: Two-factor models Article in International Journal of Finance & Economics 15(3) January with 10 Reads How we measure 'reads'.

An Econometric Model of The Term Structure of Interest Rates 3 The model presented in this paper falls within the broad class of afﬁne models of Dufﬁe and Kan [18], Dai and Singleton [13], Dufﬁe (), and more recently A¨ıt-Sahalia and Kimmel [1] and Le et al.

[39]. The model implies that bond riskFile Size: KB. "A Semiparametric Two-Factor Term Structure Model," Journal of Financial Econometrics, Society for Financial Econometrics, vol. 4(2), pages Al-Zoubi, Haitham A., " Short-term spot rate models with nonparametric deterministic drift," The Quarterly Review of Economics and Finance, Elsevier, vol.

49(3), pagesAugust. Abstract. The rapid growth of new “exotic” interest rate derivatives, especially the important classes of path-dependent, has required the introduction of models capable of pricing and hedging these instruments which are dependent on correlated movements of the different maturity of the yield by: 1.

3 Bond Pricing and Spot and Forward Rates. Zero-Coupon Bonds. Coupon Bonds. Bond Price in Continuous Time. Forward Rates. Term Structure Hypotheses. 4 Interest Rate Modeling.

Basic Concepts. One-Factor Term-Structure Models. Further One-Factor Term-Structure Models. Two-Factor Interest Rate Models. Choosing a Term-Structure Model. 5 Fitting the. Book Description. The definitive guide to fixed-come securities-revised to reflect today's dynamic financial environment.

The Second Edition of the Fixed-Income Securities and Derivatives Handbook offers a completely updated and revised look at an important area of today's financial world. In addition to providing an accessible description of the main elements of the debt market, concentrating.

Atlantic Financial Press –pages ISBN:, The book is organized into three volumes, five parts (plus appendix), and 26 chapters:Part I. Foundations Introduction to Arbitrage Pricing Theory Finite Difference Methods Monte Carlo Methods) Fundamentals of Interest Rate Modelling Fixed Income Instruments Part II.

The book also covers topics like financial markets and instruments, option pricing models, option pricing theory, exotic derivatives, second generation options, etc.

Written in a simple manner and amply supported by real world examples, questions and exercises, the book will be of interest to students, academics and practitioners alike. Shareable Link. Use the link below to share a full-text version of this article with your friends and colleagues.

Learn more. Cox-Ingersoll-Ross (CIR) Model. Two-Factor Interest Rate Models. Brennan-Schwartz Model. Extended Cox-Ingersoll-Ross Model. Heath-Jarrow-Morton (HJM) Model. The Multifactor HJM Model. Choosing a Term-Structure Model.

Fitting the Yield Curve. Yield Curve Smoothing. Smoothing Techniques. Cubic Polynomials. Non-Parametric Methods. Spline-Based Author: Moorad Choudhry.

The disadvantage of the non-parametric model is its complexity: since the volatility functions do not have analytic form simulation of interest rate paths is time-consuming.

A comparison to affine models (Brown and Schaefer, ; Duffie and Kan, ; Dai and Singleton, ) is by: 4 Interest Rate Modeling 71 Basic Concepts 71 Short-Rate Processes 72 Ito’s Lemma 74 One-Factor Term-Structure Models 75 Vasicek Model 75 Hull-White Model 76 Further One-Factor Term-Structure Models 77 Cox-Ingersoll-Ross (CIR) Model 78 Two-Factor Interest Rate Models 79 Brennan-Schwartz Model 80 Extended Cox-Ingersoll-Ross Model (7) The main empirical implication of a stochastic interest rate model, such as the Amin and Jarrow, is that it can potentially explain the so called 'time-to-maturity bias' found in tests of the Black and Scholes model.

2 The 'time-to-maturity bias' means that the pricing error, i.e., the difference between the observed option price and the Cited by: This invaluable book contains lectures presented at the Courant Institute's Mathematical Finance Seminar.

The audience consisted of academics from New York University and other universities, as well as practitioners from investment banks, hedge funds and asset-management firms. Term Structure Hypotheses. 4 Interest Rate Modeling.

Basic Concepts. One–Factor Term–Structure Models. Further One–Factor Term–Structure Models. Two–Factor Interest Rate Models.

Choosing a Term–Structure Model. 5 Fitting the Yield Curve. Non–Parametric Methods. Comparing Curves. Cao, X. Ruan, S. Su, W. Zhang: "Pricing VIX Derivatives with Infinite-Activity Jumps" Novem In this paper, we investigate a two-factor VIX model with infinite-activity jumps, which is a more realistic way to reduce errors in pricing VIX derivatives, compared with Mencía and Sentana ().

Term Structure Hypotheses. 4 Interest Rate Modeling. Basic Concepts. One-Factor Term-Structure Models. Further One-Factor Term-Structure Models.

Two-Factor Interest Rate Models. Choosing a Term-Structure Model. 5 Fitting the Yield Curve. Non /5(4). An Econometric Model of the Term Structure of Interest-Rate Swap Yields; Bond Pricing and the Term Structure of Interest Rates: A Discrete Time Approximation; The Valuation of Multiple Claim Insurance Contracts; The Relation between Risk and Optimal Debt Maturity and the Value of Leverage; A Three-Factor Defaultable Term Structure Model.

Also available from Bloomberg Press Inside the Yield Book: The Classic That Created the Science of Bond Analysis by Sidney Homer and Martin L. Liebowitz, Size: 4MB. You can write a book review and share your experiences. Other readers will always be interested in your opinion of the books you've read.

Whether you've loved the book or not, if you give your honest and detailed thoughts then people will find new books that are right for them. Part 3 Modelling and valuation: two factor models in options pricing-- interest rate derivatives-- pricing interest-rate derivative securities.

Part 4 Markets and their development: international options markets-- do derivative instruments increase market volatility?-- market making in exchange traded options-- margin, settlement and risk.

Practicalities, 5. The Ito calculus, 6. Risk neutrality and martingale measures, 7. The practical pricing of a European option, 8. Continuous barrier options, 9. Multi-look exotic options, Multiple sources of risk, Options with early exercise features, Interest rate derivatives, The pricing of exotic interest rate derivatives, FX Pricing, Hedging & Trading Strategies STREAM E New Approaches To Pricing & Hedging Credit Derivatives Pricing In The Absence Of A Risk Free Rate Louis Scott UBS INVESTMENT BANK Variance Curves In Different Risk Regimes: Volatility Of Volatility In A Brave New World Chris Cole ARTEMIS CAPITAL MANAGEMENT Financial Modelling In Times Of.

Develops unifying methodology to price fixed income volatility in a model-free fashion in 8 pages — theory piece. From the Introduction: One of the pillars supporting the recent movement toward standardized measurement and trading of interest rate volatility is a novel theory of options-based model-free fixed income volatility pricing.

The. Managing Interest Rate Risk under Non-Parallel Changes: An Application of a Two-Factor Model Manuel Moreno Introduction The model Generalized duration and convexity Hedging ratios A proposal of a solution for the limitations of the conventional duration Conclusion.

Part II Interest Rate Modelling.- 19 Allowing for Stochastic Interest Rates in the B-S Model.- 20 Change of Numeraire.- 21 The Paradigm Interest Rate Option Problem.- 22 Modelling Interest Rate Dynamics.- 23 Interest Rate Derivatives - One Factor Spot Rate Models.- 24 Interest Rate Derivatives - Multi-Factor Models.- 25 The Heath-Jarrow-Morton.

in a pricing model. Convenience Yield Models. For quite a long time, the standard model has been the Gibson-Schwartz [55] two-factor model with factors given by the commodity spot price S t and the convenience yield t. It posits risk neutral dynamics of the form (1).

Two-Factor Interest Rate Models p. 79 Brennan-Schwartz Model p. 80 Extended Cox-Ingersoll-Ross Model p. 80 Heath-Jarrow-Morton (HJM) Model p. 81 The Multifactor HJM Model p. 82 Choosing a Term-Structure Model p. 83 Fitting the Yield Curve p. 87 Yield Curve Smoothing p.

88 Smoothing Techniques p. 90 Cubic Polynomials p. 91 Non-Parametric Methods. Full text of "[ Philippe Jorion] Value At Risk The New Benchmark (Book Fi)" See other formats.

the short-term rate is generated by a continuous time two-factor model (such as Eq. (1) below). Standard evaluation models would then predict that in the absence of arbitrage opportunities, the rational bond price function depends on both the short-term rate and its instantaneous volatility.

As a result, volatility becomes an essential. The impact of the discrepancies in the yield curve on actuarial forecasting. This paper derives a two-factor model for the term structure of interest rates that segments the yield curve in a natural way. The first factor involves modelling a non-negative short rate process that primarily determines the early part of the yield curve and is obtained as a truncated Gaussian short rate.

volatility of the two-year interest rate is 70 basis points and the volatility of the five-year interest rate is basis points. The correlation between the two- and five-year interest rates is What is nearest to the bond portfolio's estimated (dollar) volatility. a) $ b) $4, c) $9, d) $25, Miller, S & Platen, E'A two-factor model for low interest rate regimes', Asia-Pacific Financial Markets, vol.

11, no. 1, pp. View description This paper derives a two-factor model for the term structure of interest rates that segments the yield curve in a natural way.

Fixed-Income Securities and Derivatives Handbook builds on the con-tent of the author’s earlier book, Bond Market Securities (FT PrenticeHall, ), and includes an updated treatment of credit derivatives andsynthetic structured products, a detailed analysis of bond futures, and casestudies specific to the U.S.

market. Aguilar, O. and M. West (), Bayesian dynamic factor models and variance matrix discounting for portfolio allocation, Journal of Business and Economic Statistics, 18, – Google ScholarCited by: 2.G Financial Economics→General Financial Markets→Asset Pricing, Trading Volume, Bond Interest Rates.

Abstract. This paper proposes the use of the two-factor term-structure model of Longstaff and Schwartz (a, LS) to estimate the risk-neutral density (RND) of the future short-term interest rate.Jonathan A Batten Thomas A Fetherston Peter G Szilagyi - Japanese Fixed Income Markets- Money Bond and Interest Rate Derivatives ( Emerald Group Publishing Limited) код .