Technical paper/Interest rates
Exploring the equity–bond relationship in a low-rate environment with unsupervised learning
The authors apply k-means clustering to low interest rate periods in order to analyze the equity hedging property of government bonds.
High-frequency movements of the term structure of US interest rates: the role of oil market uncertainty
This paper analyzes the impact of oil market uncertainty on the level, slope and curvature factors derived from the term structure of US interest rates.
The relationship between oil prices, global economic policy uncertainty and financial market stress
This paper introduces two models: the first analyzes the impacts of global economic policy uncertainty, gold prices and three-month US Treasury bill rates on oil prices between 1997 and 2020, and the second examines the effects of oil prices and US…
Risky caplet pricing with backward-looking rates
The Hull-White model for short rates is extended to include compounded rates and credit risk
The curious case of backward short rates
A discretisation approach for both backward- and forward-looking interest rate derivatives is proposed
Benchmark reform goes non-linear
Terminating Libor will bring great challenges to the pricing of non-linear rate products
Libor replacement II: completing the generalised FMM
The FMM is upgraded to model the full term structure, pricing all possible bonds and the bank account
Identification of interbank loans and interest rates from interbank payments: a reliability assessment
The authors investigate the reliability of the “Furfine filter” often used to identify interbank loans and interest rates from interbank payments settled at central banks.
Two-factor Black-Karasinski pricing kernel
Analytic formulas for bond prices and forward rates are derived by expanding existing rate models
Are lenders using risk-based pricing in the Italian consumer loan market? The effect of the 2008 crisis
This paper analyzes whether in Italy the price of consumer loans is based on borrower-specific credit risk.
The short-term Danish interbank market before, during and after the financial crisis
This paper studies the microstructure of the short-term uncollateralized Danish interbank market before, during and after the financial crisis, and into an era of negative interest rates.
The impact of unconventional monetary policy shocks on the crude oil futures market
This paper examines how West Texas Intermediate (WTI) crude oil price returns and volatilities respond to changes in US monetary policy.
Flylets and invariant risk metrics
Kharen Musaelian, Santhanam Nagarajan and Dario Villani show how to build robust risk metrics for bond returns
Cutting Edge introduction: Sticky SABR
Quants develop a hassle-free model that can handle negative interest rates
The free boundary SABR: natural extension to negative rates
Antonov, Konikov and Spector adapt the popular SABR model to a negative rates environment
Credit goes to forward rate spreads
Term structure of interest rates explained with a credit model
Differential rates, differential prices
Differential rates, differential prices
SABR goes normal
SABR goes normal
Lois: credit and liquidity
Lois: credit and liquidity
General short-rate analytics
Alexandre Antonov and Michael Spector present an analytical approximation of zero-coupon bonds and swaption prices for general short-rate models. The approximation is based on regular and singular expansions with respect to low volatility and contains a…
The CMS triangle arbitrage
The CMS triangle arbitrage
Information of interest
The flow of information in financial markets on future liquidity risk generates the rise and fall of demand for default-free bonds. Here, Dorje Brody and Robyn Friedman present an approach to pricing these bonds and the associated derivatives, based on…
Delta and vega hedging in the SABR and LMM-SABR models
Riccardo Rebonato, Andrey Pogudin and Richard White examine the hedging performance of the SABR and LMM-SABR models using real market data. As a by-product, they gain indirect evidence about how well specified the two models are. The results are…