Modelling of stochastic fat-tailed auto-correlated processes: an application to short-term rates

Olga Yashkir and Yuri Yashkir

Quantitative Finance, 2003, vol. 3, issue 3, 195-200

Abstract: Many financial products sensitive to daily rate changes dictate the importance of adequate modelling of short-term rates. Their intrinsic properties are investigated based on historical market data. A new short-term rate model with the non-Gaussian random driver and auto-correlation factors is introduced. Special calibration procedures for the model are presented. Short-term rate stochastic dynamics are investigated in several numerical experiments.

Date: 2003
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DOI: 10.1088/1469-7688/3/3/305

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