The Mean Field Market Model Revisited
Fuente:
arXiv
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| Autores principales: | , , |
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| Formato: | Preprint |
| Publicado: |
2023
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| Acceso en línea: | |
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| _version_ | 1866914681335054336 |
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| author | Hasenbichler, Manuel Müller, Wolfgang Thonhauser, Stefan |
| author_facet | Hasenbichler, Manuel Müller, Wolfgang Thonhauser, Stefan |
| contents | In this paper, we present an alternative perspective on the mean-field LIBOR market model introduced by Desmettre et al. in arXiv:2109.10779. Our novel approach embeds the mean-field model in a classical setup, but retains the crucial feature of controlling the term rate's variances over large time horizons. This maintains the market model's practicability, since calibrations and simulations can be carried out efficiently without nested simulations. In addition, we show that our framework can be directly applied to model term rates derived from SOFR, ESTR or other nearly risk-free overnight short-term rates -- a crucial feature since many IBOR rates are gradually being replaced. These results are complemented by a calibration study and some theoretical arguments which allow to estimate the probability of unrealistically high rates in the presented market models. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2402_10215 |
| institution | arXiv |
| publishDate | 2023 |
| record_format | arxiv |
| spellingShingle | The Mean Field Market Model Revisited Hasenbichler, Manuel Müller, Wolfgang Thonhauser, Stefan Mathematical Finance Probability Trading and Market Microstructure 60G51, 60H10, 60J70, 91G05, 91G30 In this paper, we present an alternative perspective on the mean-field LIBOR market model introduced by Desmettre et al. in arXiv:2109.10779. Our novel approach embeds the mean-field model in a classical setup, but retains the crucial feature of controlling the term rate's variances over large time horizons. This maintains the market model's practicability, since calibrations and simulations can be carried out efficiently without nested simulations. In addition, we show that our framework can be directly applied to model term rates derived from SOFR, ESTR or other nearly risk-free overnight short-term rates -- a crucial feature since many IBOR rates are gradually being replaced. These results are complemented by a calibration study and some theoretical arguments which allow to estimate the probability of unrealistically high rates in the presented market models. |
| title | The Mean Field Market Model Revisited |
| topic | Mathematical Finance Probability Trading and Market Microstructure 60G51, 60H10, 60J70, 91G05, 91G30 |
| url | https://arxiv.org/abs/2402.10215 |