Modelling the risk that a financial institution may not be able to roll over short-term borrowing at the market reference rate, we derive the dynamics of (interbank) reference term rates (e.g., LIBOR) and their spread vis-à-vis benchmarks based on overnight reference rates, e.g., rates implied...

Interest-rate volatility is known to be positively level dependent, i.e., to correlate positively with interest rate levels. However, recent research has provided compelling evidence that as interest rates rise, the amount of level dependence decreases. We advance this line of research by...

Interest-rate benchmark reform has revived short-rate modelling. One reason is that short-rate models provide a consistent framework in which different benchmarks, and contracts linked to them, can be compared. Another reason is that new benchmarks can be directly dependent on very short-term...

Chapter 1 Preliminaries -- Chapter 2 Risk and Expected Utility -- Chapter 3 Market Pricing and Market E ciency -- Chapter 4 Modern Portfolio Theory -- Chapter 5 Asset Pricing -- Chapter 6 Introduction to Derivatives -- Chapter 7 Arbitrage and Model-free Pricing Methods- Chapter 8 Modelling,...

It is generally held that derivative prices do not contain useful predictive information, that is, information relating to the distribution of future financial variables under the real-world measure. This is because the market’s implicit forecast of the future becomes entangled with market...