Models for the Interest Rate and Interest Rate Derivatives

2012 ◽  
pp. 119-128
Author(s):  
Szymon Borak ◽  
Wolfgang Karl Härdle ◽  
Brenda López-Cabrera
Keyword(s):  
Interest Rate ◽  
Interest Rate Derivatives ◽  
The Interest Rate

Sensitivities under G2++ model of the yield curve

2017 ◽  
Vol 04 (01) ◽  
pp. 1750008
Author(s):  
H. Jaffal ◽  
Y. Rakotondratsimba ◽  
A. Yassine
Keyword(s):  
Interest Rate ◽  
Yield Curve ◽  
Gaussian Model ◽  
Interest Rate Derivatives ◽  
Market Participants ◽  
Liability Management ◽  
Analytic Expressions ◽  
Text Model ◽  
The Interest Rate ◽  
Coupon Bond

The two-additive-factor Gaussian model G2[Formula: see text] is a famous stochastic model for the instantaneous short rate. It has functional qualities required in various practical purposes, as in Asset Liability Management and in Trading of interest rate derivatives. Though closed formulas for the prices of various main interest-rate instruments are known and used under the G2[Formula: see text] model, it seems that references for the corresponding sensitivities are not clearly presented over the financial literature. To fill this gap is one of our purposes in the present work. We derive here analytic expressions for the sensitivities of zero-coupon bond, coupon-bearing bonds, portfolio of coupon bearing bonds. The sensitivities under consideration here are those with respect to the shocks linked to the unobservable two-uncertainty shock risk/opportunity factors underlying the G2[Formula: see text] model. As a such, the hedging of a position sensitive to the interest rate by means of a portfolio (in accordance with the market participants practice) becomes easily transparent as just resulting from the balance between the various involved sensitivities.

Managing Interest Rate Risk

2018 ◽  
pp. 157-171
Keyword(s):  
Monte Carlo Simulation ◽  
Monte Carlo ◽  
Interest Rate ◽  
Six Sigma ◽  
Net Present Value ◽  
Interest Rate Risk ◽  
Interest Rate Derivatives ◽  
Rate Risk ◽  
Simulation Results ◽  
The Interest Rate

This chapter discusses the method's application to interest rate risk. The method uses interest rate derivatives elaborating how to value the two-year inverse floater derivative in order to manage interest rate risk. The chapter presents a model for the interest rate risk associated with two-year Inverse Floater Derivative as follows: 1) Monte Carlo simulation is used to stochastically calculate the total Net Present Value (NPV) of the two-year Inverse Floater Derivative, the associated Variance, Standard Deviation and VAR; 2) Six Sigma process capability metrics are also stochastically calculated against desired specified target limits for the total NPV, as well as relating VAR of two-year Inverse Floater Derivative; 3) Simulation results are presented and analysed.

Models for the Interest Rate and Interest Rate Derivatives

2010 ◽  
pp. 111-120
Author(s):  
Szymon Borak ◽  
Wolfgang Karl Härdle ◽  
Brenda López Cabrera
Keyword(s):  
Interest Rate ◽  
Interest Rate Derivatives ◽  
The Interest Rate

Stochastic volatility asymptotics of defaultable interest rate derivatives under a quadratic Gaussian model

2016 ◽  
Vol 17 (01) ◽  
pp. 1750003
Author(s):  
Ji-Hun Yoon ◽  
Jeong-Hoon Kim ◽  
Sun-Yong Choi ◽  
Youngchul Han
Keyword(s):  
Interest Rate ◽  
Stochastic Volatility ◽  
Term Structure ◽  
Default Risk ◽  
Gaussian Model ◽  
Quadratic Term ◽  
Interest Rate Derivatives ◽  
Term Structure Model ◽  
Quadratic Term Structure ◽  
The Interest Rate

Stochastic volatility of underlying assets has been shown to affect significantly the price of many financial derivatives. In particular, a fast mean-reverting factor of the stochastic volatility plays a major role in the pricing of options. This paper deals with the interest rate model dependence of the stochastic volatility impact on defaultable interest rate derivatives. We obtain an asymptotic formula of the price of defaultable bonds and bond options based on a quadratic term structure model and investigate the stochastic volatility and default risk effects and compare the results with those of the Vasicek model.

The Role of Different Channels in Transmitting Monetary Policy into Output and Price in Vietnam

2015 ◽  
pp. 20-40
Author(s):  
Vinh Nguyen Thi Thuy
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Interest Rate ◽  
Money Supply ◽  
Monetary Transmission ◽  
Impulse Response Functions ◽  
Short Run ◽  
The Exchange Rate ◽  
The Interest Rate ◽  
Interest Rate Channel

The paper investigates the mechanism of monetary transmission in Vietnam through different channels - namely the interest rate channel, the exchange rate channel, the asset channel and the credit channel for the period January 1995 - October 2009. This study applies VAR analysis to evaluate the monetary transmission mechanisms to output and price level. To compare the relative importance of different channels for transmitting monetary policy, the paper estimates the impulse response functions and variance decompositions of variables. The empirical results show that the changes in money supply have a significant impact on output rather than price in the short run. The impacts of money supply on price and output are stronger through the exchange rate and credit channels, but however, are weaker through the interest rate channel. The impacts of monetary policy on output and inflation may be erroneous through the equity price channel because of the lack of an established and well-functioning stock market.

DETERMINAN INFLASI DI INDONESIA PERIODE 1980-2015

2016 ◽  
Vol 21 (1) ◽  
pp. 1-7
Author(s):  
Risna Risna
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Money Supply ◽  
Government Spending ◽  
Positive Impact ◽  
Secondary Data ◽  
Quantitative Approach ◽  
State Spending ◽  
Factors Affecting ◽  
The Interest Rate

This study aims to determine the effect of government spending, the money supply, the interest rate of Bank Indonesia against inflation.This study uses secondary data. Secondary data were obtained directly from the Central Bureau of Statistics and Bank Indonesia. It can be said that there are factors affecting inflationas government spending, money supply, and interest rates BI. The reseach uses a quantitative approach to methods of e-views in the data. The results of analysis of three variables show that state spending significantand positive impact on inflationin Indonesia, the money supply significantand negative to inflationin Indonesia, BI rate a significantand positive impact on inflation in Indonesia

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