Interest Rate Modeling - The Potential Approach and Multi-Curve Potential Models

  • This thesis is concerned with interest rate modeling by means of the potential approach. The contribution of this work is twofold. First, by making use of the potential approach and the theory of affine Markov processes, we develop a general class of rational models to the term structure of interest rates which we refer to as "the affine rational potential model". These models feature positive interest rates and analytical pricing formulae for zero-coupon bonds, caps, swaptions, and European currency options. We present some concrete models to illustrate the scope of the affine rational potential model and calibrate a model specification to real-world market data. Second, we develop a general family of "multi-curve potential models" for post-crisis interest rates. Our models feature positive stochastic basis spreads, positive term structures, and analytic pricing formulae for interest rate derivatives. This modeling framework is also flexible enough to accommodate negative interest rates and positive basis spreads.

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Author:Anh-The Nguyen
Advisor:Frank Seifried
Document Type:Doctoral Thesis
Language of publication:English
Date of Publication (online):2016/08/04
Year of first Publication:2016
Publishing Institution:Technische Universität Kaiserslautern
Granting Institution:Technische Universität Kaiserslautern
Acceptance Date of the Thesis:2016/08/03
Date of the Publication (Server):2016/08/05
Page Number:II, 132
Faculties / Organisational entities:Kaiserslautern - Fachbereich Mathematik
DDC-Cassification:5 Naturwissenschaften und Mathematik / 510 Mathematik
Licence (German):Standard gemäß KLUEDO-Leitlinien vom 30.07.2015