Consistent re-calibration of the discrete-time multifactor Vasicek model

Artikel

The discrete-time multifactor Vasicek 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 Vasicek 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 Vasicek models.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Journal: Risks ; ISSN: 2227-9091 ; Volume: 4 ; Year: 2016 ; Issue: 3 ; Pages: 1-31 ; Basel: MDPI

Classification and Topics

• Classification: Wirtschaft
• Subject: interest rate model ; re-calibration ; HJM model ; Vasicek model ; Hull–White extension

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Harms, Philipp ; Stefanovits, David ; Teichmann, Josef ; Wüthrich, Mario V.
• Event: Veröffentlichung
• (who): MDPI
• (where): Basel
• (when): 2016

Further information

• DOI: doi:10.3390/risks4030018
• Handle: http://hdl.handle.net/10419/167895
• Last update: 10.03.2025, 11:43 AM CET