Consistent Re-Calibration of the Discrete-Time Multifactor Vasiček Model†
AbstractThe discrete-time multifactor Vasiček model is a tractable Gaussian spot rate model. Typically, two- or three-factor versions allow one to capture the dependence structure between yields with different times to maturity in an appropriate way. In practice, re-calibration of the model to the prevailing market conditions leads to model parameters that change over time. Therefore, the model parameters should be understood as being time-dependent or even stochastic. Following the consistent re-calibration (CRC) approach, we construct models as concatenations of yield curve increments of Hull–White extended multifactor Vasiček models with different parameters. The CRC approach provides attractive tractable models that preserve the no-arbitrage premise. As a numerical example, we fit Swiss interest rates using CRC multifactor Vasiček models. View Full-Text
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Harms, P.; Stefanovits, D.; Teichmann, J.; Wüthrich, M.V. Consistent Re-Calibration of the Discrete-Time Multifactor Vasiček Model. Risks 2016, 4, 18.
Harms P, Stefanovits D, Teichmann J, Wüthrich MV. Consistent Re-Calibration of the Discrete-Time Multifactor Vasiček Model. Risks. 2016; 4(3):18.Chicago/Turabian Style
Harms, Philipp; Stefanovits, David; Teichmann, Josef; Wüthrich, Mario V. 2016. "Consistent Re-Calibration of the Discrete-Time Multifactor Vasiček Model." Risks 4, no. 3: 18.