AN EMPIRICAL INVESTIGATION OF THE FORWARD INTEREST RATE TERM STRUCTURE

DOI10.1142/S0219024900000838MaRDI QIDQ4528084zbMATHFDO

Authors A. Matacz, Jean-Philippe Bouchaud

Publication date 2000

Published in International Journal of Theoretical and Applied Finance (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/cond-mat/9907297

zbMATH Keywords

interest rate optionsinterest rate derivativesInterest rate modelling

Mathematics Subject Classification ID

Microeconomic theory (price theory and economic markets) (91B24)

Abstract: In this paper we study empirically the Forward Rate Curve (FRC) of 5 different currencies. We confirm and extend the findings of our previous investigation of the U.S. Forward Rate Curve. In particular, the average FRC follows a square-root law, with a prefactor related to the spot volatility, suggesting a Value-at-Risk like pricing. We find a striking correlation between the instantaneous FRC and the past spot trend over a certain time horizon, in agreement with the idea of an extrapolated trend effect. We present a model which can be adequately calibrated to account for these effects.

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Cites work

• Bond Pricing and the Term Structure of Interest Rates: A New Methodology for Contingent Claims Valuation
• Phenomenology of the interest rate curve

Cited in

(12)

• Phenomenology of the interest rate curve
• EXPLAINING THE FORWARD INTEREST RATE TERM STRUCTURE
• Forward interest rates as predictors of future US spot rates before and after the 2008 financial crisis
• Term structure extrapolation and asymptotic forward rates
• The nature of the dependence of the magnitude of rate moves on the rates levels: a universal relationship
• AN ALTERNATIVE INTEREST RATE TERM STRUCTURE MODEL
• HOW DOES THE EURODOLLAR INTEREST RATE BEHAVE?
• The implied forward rate as an indicator of disturbances in Polish interbank market
• A COMMON MARKET MEASURE FOR LIBOR AND PRICING CAPS, FLOORS AND SWAPS IN A FIELD THEORY OF FORWARD INTEREST RATES
• A Quantum Field Theory Term Structure Model Applied to Hedging
• Funding shortages, expectations, and forward rate risk premium
• Alternative defaultable term structure models

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