Interest-rate simulation under the real-world measure within a Gaussian HJM framework

Takashi Yasuoka

doi:10.1080/21649502.2014.995213

Interest-rate simulation under the real-world measure within a Gaussian HJM framework

Takashi Yasuoka

Research output: Contribution to journal › Article › peer-review

Abstract

This paper studies an interest-rate simulation for risk management under the real-world measure. First, this paper proposes a method to estimate the market price of risk from historical data in a Gaussian Heath, Jarrow, and Morton framework. Next, properties of the simulation are examined in connection with historical data. Finally, the market price of risk is roughly interpreted in regard to the historical change in interest rates. These results are explained through numerical examples.

Original language	English
Number of pages	7
Journal	Quantitative Finance Letters
Volume	3
Issue number	1
DOIs	https://doi.org/10.1080/21649502.2014.995213 https://doi.org/10.1080/21649502.2014.995213
Publication status	Published - 2015 Jan 15

Keywords

Interest-rate risk assessment,
Interest-rate simulation
Market price of risk
Gaussian HJM model

ASJC Scopus subject areas

Economics, Econometrics and Finance(all)

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abstract = "This paper studies an interest-rate simulation for risk management under the real-world measure. First, this paper proposes a method to estimate the market price of risk from historical data in a Gaussian Heath, Jarrow, and Morton framework. Next, properties of the simulation are examined in connection with historical data. Finally, the market price of risk is roughly interpreted in regard to the historical change in interest rates. These results are explained through numerical examples.",

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