We present an extension of the LIBOR market model which allows for stochastic instantaneous volatilities of the forward rates in a displaced-diffusion setting. We show that virtually all the powerful and important approximations that apply in the deterministic setting can be successfully and...

This paper studies the codependence among, and drawdown and drawup properties of, US$ interest rates. The problem is attacked from the angle of regime switching. Different regimes are identified using the Hidden Markov Models (HMMs). The statistical properties in each state are examined...

We investigate the statistical properties of drawdowns and drawups in interest rates (US$) using over 10 years' worth of daily data. We analyse the nature of the drawdowns in terms of length of runs, magnitude of the individual price moves and coincidence of their occurrence across the maturity...

We look at the dependence of the magnitude of rate moves on the level of rates, and we find a universal relationship that holds across currencies and over a very extended period of time (almost 50 years). For the very low level of rates, we find a proportional behaviour; for rates of an...