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A case study on different one-factor Cheyette models for short maturity caplet calibration
Arun Kumar Polala / Bernhard Hientzsch
fixed income / interest ratesResource overview

A case study on different one-factor Cheyette models for short maturity caplet calibration

Paper2024

by Arun Kumar Polala, Bernhard Hientzsch

Tags
fixed incomeinterest ratesmodel calibrationstochastic processes

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Suggested foundations for optimisation and numerical methods and rates and fixed income. Specialist prerequisites vary by paper.

Before you read

  1. Vectors, Matrices and Linear Systems

    Read the linear algebra used to define a numerical problem.

  2. Constrained and Convex Optimisation

    Identify the objective, constraints and conditions for an optimum.

  3. The Bank Account, Short Rate, and the Fundamental Pricing Equation

    Understand discounting in a stochastic-rate model.

  4. DV01, Dollar Duration, and One-Factor Price Sensitivity

    Translate yield movements into first-order price risk.

Go further

  1. Calibration as an Inverse Problem

    Understand identifiability and fitted model parameters.

  2. Numerical Conditioning and Stability

    Separate model error from unstable numerical computation.

  3. Bootstrapping the Spot Curve from Market Instruments

    Build a consistent discount curve.

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Explore Linear Algebra, Optimisation and Numerical Methods Explore Fixed Income and Interest-Rate Models

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