Questions tagged [negative]

The tag has no usage guidance.

Filter by
Sorted by
Tagged with
7 votes
4 answers
3k views

How to avoid having negative volatility when applying Heston model?

When applying the Heston model to generate the sample volatility surface, some of the volatility value will be negative. I am just wondering what do practioners normally do with these negative value. ...
AZhu's user avatar
  • 803
7 votes
1 answer
639 views

What if: Negative interest on an overdrawn bank account?

Theoretical question: Consider if a bank account had a -12% yearly interest rate, and an account was currently overdrawn to a balance of -$100. What would the bank do to the -$100 balance after one ...
AAron's user avatar
  • 173
4 votes
2 answers
2k views

Which models do Bloomberg/Reuters use to derive implied volatility for interest rate derivatives with negative forward rates?

can anybody tell me which models Bloomberg and Reuters ares using to derive implied volatility for interest derivatives with negative forward rates? I know that Black-76 is the standard model, and ...
Philipp's user avatar
  • 41
4 votes
1 answer
424 views

Hedging EURUSD with negative rates

I was reading an article and i saw this : Fund managers based outside the eurozone can profit from buying Europe’s negative-yielding government debt thanks to an uplift from hedging the currency. ...
TmSmth's user avatar
  • 385
3 votes
1 answer
164 views

Why for one year (and not two or three) government bonds (there is a spike for Switzerland & Denmark)?

On 10.10.2012, I have looked at the bond-rates and, both for Switzerland and Denmark, there is a discontinuity/spike at 1Y, as per below Switzerland: ON= -0.09, 1W= -0.180, 1M= -0.230, 3M= -0.2, 6M= -...
user7056's user avatar
  • 728
2 votes
1 answer
2k views

QuantLib - Calibrating Hull White one-factor on negative interest rates

I have been working with the QuantLib Python package for some days now. Currently, I am working on calibrating a Hull White one-factor model for short rates. I am calibrating the model on the yield-...
Michielap's user avatar
2 votes
1 answer
215 views

What is the industry standard model for pricing Swaptions during this time of negative interest rates, normal model or shifted log-normal model?

I have referred to the some of the well known papers but none of them has a clear answer for my question. I know that both of these models have some disadvantages but, what is the industry standard ...
Urja's user avatar
  • 41
2 votes
1 answer
384 views

Is inverted Japanese style curve persistent when negative rates are real / market - observed?

Are the inverted (Japanese style) governmental yield curves being a sign a recession/credit risk or should they be modelled as being due to a lack of liquidity? (...with such curves evolving into a ...
2 votes
0 answers
110 views

Neglect the positive values in negative interest rates modelling?

The magnitude of the negative interested rate should vary correlated with the increase in fixed assets prices and with cross-currency basis spreads. Could their volatility / correlation coefficients,...
user7056's user avatar
  • 728
1 vote
2 answers
1k views

how negative rates (mr and rf) affect CAPM

I don't understand how the negative rates factor into this and what it means in the market ...
Sebas92's user avatar
  • 11
1 vote
1 answer
92 views

Value At Risk Modelling for electricity market with negative prices

I'm a bit at loss after trying to find papers regarding tail risk for electricity markets. There doesn't appear to be a whole lot of literature (or perhaps I haven't managed to find it) regarding ...
Alex's user avatar
  • 11
1 vote
1 answer
105 views

Separated software and physical cash flows modelling and pricing to be used with negative interest rates?

The physical cash presence in the final transactions is one of the issues in the presently observed negative interest rates bonds. Such a situation has historically been modelled within the "liquidity ...
user7056's user avatar
  • 728
1 vote
0 answers
68 views

Should portfolio be optimized by marking to the future than marking to market (excluding currencies)?

Observing the negative interest bonds in Switzerland, Denmark, GErmany the value of higher presently (credit-free) outgoing cash flows seems less important than the value of lower future (credit-free) ...
user7056's user avatar
  • 728
0 votes
1 answer
191 views

Discussion about negative interest rate

Now I'm updating typical equity premium of CAPM and Fama French 3 factors. As you know, some of interest rates are already in negative. To calculate market factors, not so hard to apply them as risk ...
Shun's user avatar
  • 1
0 votes
0 answers
68 views

Heston Process: Accept-Reject Sampling to Alleviate the Problem of Negative Variances

I've read even in recent papers, and on page 21 of the book "The Volatility Surface" by Jim Gatheral (2006), all the debate over whether to reflect or truncate negative variances whilst ...
crow's user avatar
  • 1
0 votes
0 answers
95 views

Ito's lemma results in negative volatility processes

I struggle with the interpretation of a process I derive from Ito's Lemma. Let's say I have function f(S,t) which is twice differentiable wrt S. I thus can apply Ito's Lemma to get $df(S,t)$. So far ...
ValuePartner's user avatar