An Empirical Investigation of the Forward Interest Rate Term Structure
Andrew Matacz, Jean-Philippe Bouchaud
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.
Create a lesson
Related papers
Knots in Condensed Matters
Y. M. Cho
Bouchaud's model exhibits two different aging regimes in dimension one
Gerard Ben Arous, Jiri Cerny
Periodic diffraction patterns for 1D quasicrystals
Pawel Buczek, Lorenzo Sadun, Janusz Wolny
Adiabatic association of ultracold molecules via magnetic field tunable interactions
Krzysztof Goral, Thorsten Koehler, Simon A. Gardiner et al.
High-Temperature Atomic Superfluidity in Lattice Boson-Fermion Mixtures
F. Illuminati, A. Albus
Constructive Methods of Invariant Manifolds for Kinetic Problems
A. N. Gorban, I. V. Karlin, A. Yu. Zinovyev