The classification of term structure shapes in the two-factor Vasicek model -- a total positivity approach

Autor:	Keller-Ressel, Martin
Rok vydání:	2019
Předmět:	Quantitative Finance - Mathematical Finance 91G30 26A99
Druh dokumentu:	Working Paper
Popis:	We provide a full classification of all attainable term structure shapes in the two-factor Vasicek model of interest rates. In particular, we show that the shapes normal, inverse, humped, dipped and hump-dip are always attainable. In certain parameter regimes up to four additional shapes can be produced. Our results apply to both forward and yield curves and show that the correlation and the difference in mean-reversion speeds of the two factor processes play a key role in determining the scope of attainable shapes. The key mathematical tool is the theory of total positivity, pioneered by Samuel Karlin and others in the 1950ies. Comment: major rewrite of the original paper
Databáze:	arXiv
Externí odkaz:	http://arxiv.org/abs/1908.04667 Zobrazit plný text záznamu View this record from Arxiv