[go: up one dir, main page]

IDEAS home Printed from https://ideas.repec.org/p/ivi/wpasad/2008-09.html
   My bibliography  Save this paper

A multiobjective approach using consistent rate curves to the calibration of a Gaussian Heath-Jarrow-Morton model

Author

Listed:
  • Antonio Falcó

    (Universidad CEU Cardenal Herrera)

  • Juan Nave

    (Universidad de Castilla-La Mancha)

  • Lluís Navarro

    (Universidad CEU Cardenal Herrera)

Abstract
In this paper we propose an alternate calibration algorithm, by using a consistent family of yield curves, that fits a Gaussian Heath-Jarrow-Morton model jointly to the implied volatilities of caps and zero-coupon bond prices. The algorithm is capable for finding several Pareto optimal points as is expected for a general nonlinear multicriteria optimization problem. The calibration approach is evaluated in terms of in-sample data fitting as well as stability of parameter estimates. Furthermore, the efficiency is tested against a non-consistent traditional method by using simulated and US market data.

Suggested Citation

  • Antonio Falcó & Juan Nave & Lluís Navarro, 2008. "A multiobjective approach using consistent rate curves to the calibration of a Gaussian Heath-Jarrow-Morton model," Working Papers. Serie AD 2008-09, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  • Handle: RePEc:ivi:wpasad:2008-09
    as

    Download full text from publisher

    File URL: http://www.ivie.es/downloads/docs/wpasad/wpasad-2008-09.pdf
    File Function: Fisrt version / Primera version, 2008
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Flavio Angelini & Stefano Herzel, 2005. "Consistent calibration of HJM models to cap implied volatilities," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 25(11), pages 1093-1120, November.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bueno-Guerrero, Alberto & Moreno, Manuel & Navas, Javier F., 2016. "The stochastic string model as a unifying theory of the term structure of interest rates," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 461(C), pages 217-237.
    2. Falini, Jury, 2010. "Pricing caps with HJM models: The benefits of humped volatility," European Journal of Operational Research, Elsevier, vol. 207(3), pages 1358-1367, December.
    3. Claudio Fontana & Giacomo Lanaro & Agatha Murgoci, 2024. "The geometry of multi-curve interest rate models," Papers 2401.11619, arXiv.org, revised Jun 2024.
    4. A. Falco & LL. Navarro & J. Nave, 2010. "On the calibration of a Gaussian Heath-Jarrow-Morton model using consistent forward rate curves," Quantitative Finance, Taylor & Francis Journals, vol. 11(4), pages 495-504.
    5. Hans-Peter Bermin, 2014. "On Dynamic Forward Rate Modeling And Principal Component Analysis," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 17(05), pages 1-20.

    More about this item

    Keywords

    HJM models; consistent forward rate curves; multiobjective calibration;
    All these keywords.

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ivi:wpasad:2008-09. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Departamento de Edición (email available below). General contact details of provider: https://edirc.repec.org/data/ievages.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.