General analysis of long-term interest rates

Biagini, Francesca ; Gnoatto, Alessandro und Haertel, Maximilian (2020): General analysis of long-term interest rates. In: International Journal of Theoretical and Applied Finance, Bd. 23, Nr. 1, 2050002

Abstract

We introduce here the idea of a long-term swap rate, characterized as the fair rate of an overnight indexed swap (OIS) with infinitely many exchanges. Furthermore, we analyze the relationship between the long-term swap rate, the long-term yield, (F. Biagini, A. Gnoatto & M. Hartel (2018) Affine HJM Framework on SZ and long-term yield, Applied Mathematics and Optimization 77 (3), 405-441, F. Biagini & M. Hartel (2014) Behavior of long-term yields in a levy term structure, International Journal of Theoretical and Applied Finance 17 (3), 1-24, N. El Karoui, A. Frachot & H. Geman (1997) A note on the behavior of long zero coupon rates in a no arbitrage framework. Working Paper. Available at Researchgate: https://www.researchgate.net/publication/5066730), and the long-term simple rate (D. C. Brody & L. P. Hughston (2016) Social discounting and the long rate of interest, Mathematical Finance 28 (1), 306-334) as long-term discounting rate. Finally, we investigate the existence of these long-term rates in two-term structure methodologies, the Flesaker-Hughston model and the linear-rational model. A numerical example illustrates how our results can be used to estimate the nonoptional component of a CoCo bond.

• Dokumententyp: Zeitschriftenartikel
• Fakultät: Mathematik, Informatik und Statistik > Mathematik > Finanz- und Versicherungsmathematik
• Themengebiete: 500 Naturwissenschaften und Mathematik > 510 Mathematik
• ISSN: 0219-0249
• Sprache: Englisch