Interest rate guarantees seem to be included in lifeinsurance and pension products in most countries. The exact implementations of these guarantees vary from country to countryand are often linked to different distribution of investment surplusmechanisms...

The CKLS (1992) short-term risk-free interest rate process leads to valuation model for both default free bonds and contingent claims that can only be solved numerically for the general case. Valuation equations of this nature in the past have been solved using the Crank Nicolson scheme. In this...

Structural models for pricing risky debt imply a negative relationship betweeninterest rates and credit spreads. In contrast, credit default swap pricing modelsassume independence between credit risk and the term structure of interest rates.So far, empirical studies have focused on first...

A system of U.S. and euro area short- and long-term interest rates is analyzed. According to the expectations hypothesis of the term structure the interest rate spreads should be stationary and according to the uncovered interest rate parity the difference between the U.S. and euro area longterm...

This paper evaluates the predictive power of different information sets for the European Central Bank(ECB) interest rate setting behavior. We employ an ordered probit model, i.e. a limited dependent variableframework, to take into account the discreteness displayed by policy rate changes. The...

In this paper we propose a Libor model with a high-dimensional speciallystructured system of driving CIR volatility processes. A stablecalibration procedure which takes into account a given local correlationstructure is presented. The calibration algorithm is FFT based, so fastand easy to implement.

It has been shown that investors can benefit from including derivatives into theirportfolios. For retail investors, however, a direct investment in derivatives is oftentoo complicated. Investment certificates offer a potential solution to this problem.We analyze if retail investors who buy and...

Following the 2000 stockmarket crash, have US interest rates been held "too low" in relation to their natural level? Most likely, yes. Using a structural neo-Keynesian model, this paper attempts a real-time evaluation of the US monetary policy stance while ensuring consistency between the...