Modelling of stochastic fat-tailed auto-correlated processes: an application to short-term rates

Yashkir, Olga and Yashkir, Yuriy (2003): Modelling of stochastic fat-tailed auto-correlated processes: an application to short-term rates. Published in: Quantitative Finance , Vol. 3, (15 May 2003): pp. 195-200.

Abstract

Many financial products sensitive to daily rate changes dictate the importance of adequate modelling of short-term rates. Their intrinsic properties are investigated based on historical market data. A new short-term rate model with the non-Gaussian random driver and auto-correlation factors is introduced. Special calibration procedures for the model are presented.Short-term rate stochastic dynamics are investigated in several numerical experiments.

• Item Type: MPRA Paper
• Language: English
• Keywords: overnight rate, short-term rate, rate model, auto-correllation model, overnight interest rate swap, OIR, OIS
• Subjects: C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C20 - General; C - Mathematical and Quantitative Methods > C4 - Econometric and Statistical Methods: Special Topics > C46 - Specific Distributions ; Specific Statistics; C - Mathematical and Quantitative Methods > C6 - Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C61 - Optimization Techniques ; Programming Models ; Dynamic Analysis

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