Consistent re-calibration in yield curve modeling : an example

Mario V. Wüthrich

Popular yield curve models include affine term structure models. These models are usually based on a fixed set of parameters which is calibrated to the actual financial market conditions. Under changing market conditions also parametrization changes. We discuss how parameters need to be updated with changing market conditions such that the re-calibration meets the premise of being free of arbitrage. We demonstrate this (consistent) re-calibration with the Hull-White extended discrete time Vasicek model at hand, but this concept applies to a wide range of related term structure models

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Year of publication:	2015
Authors:	Wüthrich, Mario V.
Publisher:	Geneva : Swiss Finance Institute
Subject:	yield curve modeling \| term structure model \| affine term structure model \| interest rate model \| spot rate model \| Vasicek model \| Hull-White extension \| Heath-Jarrow-Morton framework \| HJM \| calibration \| consistent re-calibration \| CRC \| Zinsstruktur \| Yield curve \| Optionspreistheorie \| Option pricing theory \| Kapitaleinkommen \| Capital income \| Ökonometrisches Modell \| Econometric model \| Volatilität \| Volatility

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