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A Three-Factor Yield Curve Model: Non-Affine Structure, Systematic Risk Sources, and Generalized Duration
Canlin Li / Francis X. Diebold / Lei Ji
fixed income / interest ratesResource overview

A Three-Factor Yield Curve Model: Non-Affine Structure, Systematic Risk Sources, and Generalized Duration

Paper2006

by Canlin Li, Francis X. Diebold, Lei Ji

Tags
fixed incomeinterest ratesrisk managementterm structure models

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Suggested foundations for rates and fixed income and risk measurement and stress. Specialist prerequisites vary by paper.

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

    Understand discounting in a stochastic-rate model.

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

    Translate yield movements into first-order price risk.

  3. Random Variables and Distributions

    Represent losses as a distribution rather than one forecast.

  4. Expected Shortfall and Other Tail Risk Measures

    Distinguish a loss quantile from the average loss in the tail.

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  1. Bootstrapping the Spot Curve from Market Instruments

    Build a consistent discount curve.

  2. The Vasicek Model: Mean Reversion, Affine Bond Prices, and the Gaussian Distribution

    Study a tractable mean-reverting rate model.

  3. VaR Estimation in Practice: Variance-Covariance, Historical Simulation, Monte Carlo

    Compare risk estimators and their assumptions.

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