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Paper / 2026SMQ / 405704889369
Distributionally Robust Recovery of Omitted Factors from Forecast Residuals with Application to Interest Rate Risk Management
Jinjun Liu / Ming-Yen Cheng
fixed income / interest ratesResource overview

Distributionally Robust Recovery of Omitted Factors from Forecast Residuals with Application to Interest Rate Risk Management

Paper2026

by Jinjun Liu, Ming-Yen Cheng

Tags
fixed incomeinterest ratesoptimizationrisk management

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

Before you read

  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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