Multiple Yield Curve Modelling with CBI Processes

Claudio Fontana (), Alessandro Gnoatto and Guillaume Szulda ()
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Claudio Fontana: Department of Mathematics “Tullio Levi Civita”, University of Padova
Guillaume Szulda: Laboratoire de Probabilités, Statistique et Mode ́lisation (LPSM), Paris Diderot University

No 19/2019, Working Papers from University of Verona, Department of Economics

Abstract: We develop a modelling framework for multiple yield curves driven by continuous-state branching processes with immigration (CBI processes). Exploiting the self-exciting behavior of CBI jump processes, this approach can reproduce the relevant empirical features of spreads between different interbank rates. We provide a complete analytical framework, including a detailed study of discounted exponential moments of CBI processes. The proposed framework yields explicit valuation formulae for all linear interest rate derivatives as well as semi-closed formulae for non- linear derivatives via Fourier techniques and quantization. We show that a simple specification of the model can be successfully calibrated to market data.

Keywords: Branching process; self-exciting process; multi-curve model; interest rate; Libor rate; OIS rate; multiplicative spread; affine process. (search for similar items in EconPapers)
JEL-codes: E43 G12 (search for similar items in EconPapers)
Date: 2019-11
New Economics Papers: this item is included in nep-mac and nep-ore
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Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Multiple yield curve modelling with CBI processes (2020)
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