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Chen Model (Short-Rate Model)The Chen Model, named after its creator, Nan Chen, is a prominent type of short-rate model that plays a significant role in finance. Short-rate models are mathematical models used to describe the behavior of interest rates over time. They are particularly useful for pricing fixed-income securities, managing interest rate risk, and implementing interest rate derivatives […]
Hull-White Model – Purpose, Applications, MathematicsThe Hull-White Model, named after its creators, John Hull and Alan White, is a widely used short-rate model in finance. It plays an important role in understanding the behavior of interest rates and pricing a variety of fixed-income securities and interest rate derivatives. The model’s simplicity, tractability, and flexibility make it a popular choice among […]
Cox-Ingersoll-Ross (CIR) ModelThe Cox-Ingersoll-Ross (CIR) Model is a short-rate mathematical model used in finance to describe the evolution of interest rates over time. Developed by John C. Cox, Jonathan E. Ingersoll Jr., and Stephen A. Ross in 1985, the CIR model is one of the most widely used interest rate models in the finance industry. Its primary […]
Vasicek Model – Purpose and Mathematical FrameworkThe Vasicek Model, named after its creator Oldrich Vasicek, is a popular short-rate mathematical model used in finance to predict interest rates. First published in 1977, it was one of the first models to describe the evolution of interest rates using stochastic calculus. The model’s primary purpose is to capture the mean-reverting behavior of interest […]
Short-Rate ModelA short-rate model, in the context of interest rate derivatives, is a mathematical model that describes the future evolution of interest rates by describing the future evolution of the short rate. In finance, the short rate represents the instantaneous interest rate applicable for a very short period. It’s often called the “cash rate,” “repo rate,” […]
SEC Sues Binance for Mishandling Client Funds & Lying to RegulatorsThe Securities and Exchange Commission (SEC) has filed a lawsuit against Binance and its CEO, Changpeng Zhao. They stand accused of participating in “an extensive web of deception, conflicts of interest, lack of disclosure, and calculated evasion of the law.” Key Takeaways The US regulator alleges Binance enticed US customers to its unregulated global exchange, […]
Risk-Free Interest Rate – Measurement, Proxies, ApplicationsThe risk-free interest rate is a fundamental concept in finance that serves as the baseline for evaluating various investment options. It represents the return on an investment considered to have no risk (i.e., no default risk), such as a government bond, over a specified period. This article looks at the measurement and proxies of the […]
Yield CurveA yield curve is a graph that plots the yields of fixed-income securities against their maturities. The maturities of the securities are typically shown on the x-axis, and the yields are shown on the y-axis. A yield curve typically has an upward slope, which means that securities with longer maturities generally have higher […]
What Is the Global Financial System?The global financial system is a complex network of financial institutions, markets, and instruments that enables the flow of capital and resources within a country as well as across international borders. This web of economic interactions facilitates trade, investment, and wealth distribution among nations. By connecting markets and economies, the global financial system plays a […]
Fixed Income Analysis – Assessing Value and Risk in BondsFixed income analysis involves evaluating the value and risk of debt securities. These analyses play a role in deciding whether to buy, sell (short sell), hold, hedge, or avoid a particular security. Fixed income products, which primarily consist of bonds, are issued by various entities, including government treasuries, government agencies, companies, and international organizations. This […]
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