Fixed-Income Pricing and the Replication of Liabilities
Fuente:
arXiv
Saved in:
| Main Author: | |
|---|---|
| Format: | Preprint |
| Published: |
2025
|
| Subjects: | |
| Online Access: | |
| Tags: |
Add Tag
No Tags, Be the first to tag this record!
|
| _version_ | 1866914205120069632 |
|---|---|
| author | Filipović, Damir |
| author_facet | Filipović, Damir |
| contents | This paper develops a model-free framework for static fixed-income pricing and the replication of liability cash flows. We show that the absence of static arbitrage across a universe of fixed-income instruments is equivalent to the existence of a strictly positive discount curve that reproduces all observed market prices. We then study the replication and super-replication of liabilities and establish conditions ensuring the existence of least-cost super-replicating portfolios, including a rigorous interpretation of swap--repo replication within this static framework. The results provide a unified foundation for discount-curve construction and liability-driven investment, with direct relevance for economic capital assessment and regulatory practice. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2512_14662 |
| institution | arXiv |
| publishDate | 2025 |
| record_format | arxiv |
| spellingShingle | Fixed-Income Pricing and the Replication of Liabilities Filipović, Damir Mathematical Finance This paper develops a model-free framework for static fixed-income pricing and the replication of liability cash flows. We show that the absence of static arbitrage across a universe of fixed-income instruments is equivalent to the existence of a strictly positive discount curve that reproduces all observed market prices. We then study the replication and super-replication of liabilities and establish conditions ensuring the existence of least-cost super-replicating portfolios, including a rigorous interpretation of swap--repo replication within this static framework. The results provide a unified foundation for discount-curve construction and liability-driven investment, with direct relevance for economic capital assessment and regulatory practice. |
| title | Fixed-Income Pricing and the Replication of Liabilities |
| topic | Mathematical Finance |
| url | https://arxiv.org/abs/2512.14662 |