Multiple yield curve modelling with CBI processes

7 Nov 2019  ·  Claudio Fontana, Alessandro Gnoatto, Guillaume Szulda ·

We develop a modelling framework for multiple yield curves driven by continuous-state branching processes with immigration (CBI processes). Exploiting the self-exciting behavior of CBI jump processes, this approach can reproduce the relevant empirical features of spreads between different interbank rates... In particular, we introduce multi-curve models driven by a flow of tempered alpha-stable CBI processes. Such models are especially parsimonious and tractable, and can generate contagion effects among different spreads. We provide a complete analytical framework, including a detailed study of discounted exponential moments of CBI processes. The proposed approach allows for explicit valuation formulae for all linear interest rate derivatives and semi-closed formulae for non-linear derivatives via Fourier techniques and quantization. We show that a simple specification of the model can be successfully calibrated to market data. read more

PDF Abstract
No code implementations yet. Submit your code now


  Add Datasets introduced or used in this paper

Results from the Paper

  Submit results from this paper to get state-of-the-art GitHub badges and help the community compare results to other papers.


No methods listed for this paper. Add relevant methods here