Advanced

Joint Calibration of Year-on-Year and Zero-Coupon Products for Inflation Models

Bailly, Stéphane (2016) FMS820 20162
Mathematical Statistics
Abstract
In this thesis, we study the Jarrow and Yildirim framework for inflation modeling and provide a
new specification based on spread modeling which allows to calibrate the model to Zero-Coupons
and Year-on-Year options jointly with convexity adjustments. We use this model to provide closedform
formulas for options volatilities, convexity adjustments and Year-on-Year swaptions prices.
Calibration results are provided.
We also present Belgrade et al.’s model and show an example of its calibration to market data.
Finally, we present an HJM version of the SABR inflation model proposed by Mercurio and propose
a calibration routine allowing to retrieve both Year-on-Year and Zero-Coupon smiles to all
maturities as well as convexity... (More)
In this thesis, we study the Jarrow and Yildirim framework for inflation modeling and provide a
new specification based on spread modeling which allows to calibrate the model to Zero-Coupons
and Year-on-Year options jointly with convexity adjustments. We use this model to provide closedform
formulas for options volatilities, convexity adjustments and Year-on-Year swaptions prices.
Calibration results are provided.
We also present Belgrade et al.’s model and show an example of its calibration to market data.
Finally, we present an HJM version of the SABR inflation model proposed by Mercurio and propose
a calibration routine allowing to retrieve both Year-on-Year and Zero-Coupon smiles to all
maturities as well as convexity adjustment. (Less)
Please use this url to cite or link to this publication:
author
Bailly, Stéphane
supervisor
organization
course
FMS820 20162
year
type
H2 - Master's Degree (Two Years)
subject
language
English
id
8895062
date added to LUP
2016-11-16 11:04:40
date last changed
2016-11-24 09:53:33
@misc{8895062,
  abstract     = {In this thesis, we study the Jarrow and Yildirim framework for inflation modeling and provide a
new specification based on spread modeling which allows to calibrate the model to Zero-Coupons
and Year-on-Year options jointly with convexity adjustments. We use this model to provide closedform
formulas for options volatilities, convexity adjustments and Year-on-Year swaptions prices.
Calibration results are provided.
We also present Belgrade et al.’s model and show an example of its calibration to market data.
Finally, we present an HJM version of the SABR inflation model proposed by Mercurio and propose
a calibration routine allowing to retrieve both Year-on-Year and Zero-Coupon smiles to all
maturities as well as convexity adjustment.},
  author       = {Bailly, Stéphane},
  language     = {eng},
  note         = {Student Paper},
  title        = {Joint Calibration of Year-on-Year and Zero-Coupon Products for Inflation Models},
  year         = {2016},
}