stylized facts. In this paper, we combine flavors of those two classes of models to test whether no-arbitrage affects … forecasting. We construct cross-sectional (allowing arbitrages) and arbitrage-free versions of a parametric polynomial model to … analyze how well they predict out-of-sample interest rates. Based on U.S. Treasury yield data, we find that no-arbitrage …

basic challenges which are faced by a practical user of LMM. Incorrect implementation can lead to arbitrage in the model and … render generated prices invalid. In this paper, we present a rate interpolation scheme which not only is arbitrage-free, but …

straightforward derivation of the no-arbitrage dynamics of forward rates and forward credit spreads. The model can be calibrated to …

explanation for the surprising fact that continuous-time arbitrage-free markets are complete under weak technical conditions. …