This paper models the month-over-month change in euro-denominated (EUR) long-term interest rate swap yields. It shows that the change in the short-term interest rate has an economically and statistically significant effect on the change in EUR swap yields of different maturity tenors, after...

The market model of interest rates specifies simple forward or Libor rates as lognormally distributed, their stochastic dynamics has a linear volatility function. In this paper, the model is extended to quadratic volatility functions which are the product of a quadratic polynomial and a...

It is well-known that interest rates are extremely persistent, yet they are best modeled and understood as stationary processes. These properties are contradictory in the workhorse Gaussian affine term structure model in which the persistent data often result in unit roots that imply...

Asymmetric information between the central bank and bond markets creates an inference problem that affects the behaviour of long interest rates. This paper employs a simple macroeconomic model with a time-varying infation target to illustrate the implications of asymmetry for the sensitivity of...

This article attempts to identify the best model of the short term interest rates that can predict its stochastic process over time.We studied eight different models of interest rates in the short term. The choice of these models was the aim of analyzing the relevance of certain specifications...

We employ conformal symmetries to provide a generic tractable framework for interest rate modelling. The approach combines calibration flexibility of market models with tractability and computational efficiency of shot rate models. The methodology enables robust calibration to the whole variety...

In this paper, the Federal Funds Rate Target and the one-year T-Bill are the two yield-factors explaining the movements of the term structure, Using Duffie and Kan (1996) approach, the two rates are consistently modeled and an affine model of the term structure results that is able to...

The macroeconomic effect of term premiums is a controversial issue both theoretically and quantitatively. In this paper, we explore the possibility that term premiums affect inflation and the real economy via exchange rate dynamics. For this purpose, we construct a small open economy model with...

We introduce a tractable multi-currency model with stochastic volatility and correlated stochastic interest rates that takes into account the smile in the FX market and the evolution of yield curves. The pricing of vanilla options on FX rates can be performed efficiently through the FFT...

This paper introduces a generalized discrete time framework to evaluate the empirical performance of a wide variety of well-known models in capturing the dynamic behavior of short term interest rates. A new class of models which displays nonlinearity and asymmetry in the drift, and incorporates...