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Statistical modeling of SOFR term structure
Teemu Pennanen / Waleed Taoum
derivatives / fixed incomeResource overview

Statistical modeling of SOFR term structure

Paper2025

by Teemu Pennanen, Waleed Taoum

Tags
derivativesfixed incomeinterest ratesterm structure models

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Suggested foundations for rates and fixed income and options and derivatives pricing. 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. The Binomial Model

    Build replication and risk-neutral probabilities in a tractable model.

  4. Market Model and Risk-Neutral Valuation

    Distinguish pricing probabilities from physical forecasts.

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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. The Black-Scholes PDE, Formula and Implied Volatility

    Connect the pricing equation, closed-form value and implied volatility.

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