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From the Black-Karasinski to the Verhulst model to accommodate the unconventional Fed's policy
A. Itkin / A. Lipton / D. Muravey
fixed income / interest ratesResource overview

From the Black-Karasinski to the Verhulst model to accommodate the unconventional Fed's policy

Paper2020

by A. Itkin, A. Lipton, D. Muravey

Tags
fixed incomeinterest ratesnumerical methodspartial differential equationsstochastic differential equationsterm structure models

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Suggested foundations for rates and fixed income and optimisation and numerical methods. 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. Vectors, Matrices and Linear Systems

    Read the linear algebra used to define a numerical problem.

  4. Constrained and Convex Optimisation

    Identify the objective, constraints and conditions for an optimum.

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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. Calibration as an Inverse Problem

    Understand identifiability and fitted model parameters.

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