Applying historical data from the USD LIBOR transition period, we estimate a joint model for SOFR, Fed Funds, and Eurodollar futures rates as well as spot USD LIBOR and term repo rates. The framework endogenously models basis spreads between each of the benchmark rates and allows for the...

Short-term Treasury debt has high Sharpe ratios and, according to the Hansen-Jagannathan bound, implies a very volatile bond market SDF. In this paper, we show that a small convenience yield on the risk-free asset can rationalize this pattern without requiring a volatile SDF. We further show...

In this study, we consider the pricing of energy derivatives when the evolution of spot prices follows a tempered stable or a CGMY-driven Ornstein-Uhlenbeck process. To this end, we first calculate the characteristic function of the transition law of such processes in closed form. This result is...

Volatility Skew and Smile of Interest Rate products (Swaption and Caplet) are represented by SABR (Stochastic Alpha Beta Rho model). So, the Interest Rate derivatives model for pricing the callable exotic swaps should be comparable to the SABR volatility surface. In the interest rate derivatives...

The current paper examines the maturity effect which states that “the futures prices volatility increases as the futures contract approaches its maturity period”. As per maturity effect theory, when a contract approaches its delivery date, the flow of information affects the prices. The...

Using Credit Default Swap spreads, we construct a forward-looking, market-implied carbon risk factor and show that carbon risk affects firms' credit spread. The effect is larger for European than North American firms and varies substantially across industries, suggesting the market recognises...