Non-Negativity, Zero Lower Bound and Affine Interest Rate Models

Guillaume Roussellet

in Economics Thesis from University Paris Dauphine from Paris Dauphine University

Abstract: This thesis presents new developments in the literature of non-negative affine interest rate models. The first chapter is devoted to the introduction of the main mathematical tools used in the following chapters. In particular, it presents the so-called affine processes which are extensively employed in no-arbitrage interest rate models. Chapter 2 provides a new filtering and estimation method for linear-quadratic state-space models. This technique is exploited in the 3rd chapter to estimate a positive asset pricing model on the term structure of Euro area interbank spreads. This allows us to decompose the interbank risk into a default risk and a liquidity risk components. Chapter 4 proposes a new recursive method for building general multivariate affine processes from their univariate counterparts. In particular, our method does not impose the conditional independence between the different vector elements. We apply this technique in Chapter 5 to produce multivariate non-negative affine processes where some components can stay at zero for several periods. This process is exploited to build a term structure model consistent with the zero lower bound features.

Keywords: Modèle de taux d’intérêt positifs; Risque interbancaire,; Filtre non-Linéaire; Processus affine; Taux au plancher; Positive affine term structure models; Non-Linear filtering; Interbank risk; Affine process; Zero lower bound (search for similar items in EconPapers)
JEL-codes: C32 C46 C53 C57 (search for similar items in EconPapers)
Date: 2015 Written 2015
Note: dissertation
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