AN EMPIRICAL INVESTIGATION OF THE FORWARD INTEREST RATE TERM STRUCTURE

DOI10.1142/S0219024900000838zbMATH Open1071.91512arXivcond-mat/9907297MaRDI QIDQ4528084FDOQ4528084

A. Matacz, Jean-Philippe Bouchaud

Publication date: 2000

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

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.

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

Recommendations

• Phenomenology of the interest rate curve
• scientific article; zbMATH DE number 912569
• VOLATILITY STRUCTURES OF FORWARD RATES AND THE DYNAMICS OF THE TERM STRUCTURE
• Interest rate volatility and the shape of the term structure

zbMATH Keywords

interest rate optionsinterest rate derivativesInterest rate modelling

Mathematics Subject Classification ID

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

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 (7)

• AN ALTERNATIVE INTEREST RATE TERM STRUCTURE MODEL
• Alternative defaultable term structure models
• HOW DOES THE EURODOLLAR INTEREST RATE BEHAVE?
• A COMMON MARKET MEASURE FOR LIBOR AND PRICING CAPS, FLOORS AND SWAPS IN A FIELD THEORY OF FORWARD INTEREST RATES
• EXPLAINING THE FORWARD INTEREST RATE TERM STRUCTURE
• A Quantum Field Theory Term Structure Model Applied to Hedging
• Phenomenology of the interest rate curve

This page was built for publication: AN EMPIRICAL INVESTIGATION OF THE FORWARD INTEREST RATE TERM STRUCTURE

Report a bug (only for logged in users!)Click here to report a bug for this page (MaRDI item Q4528084)