Lunch & Learn “A Heath-Jarrow-Morton model compliant with Solvency II? Promises and pitfalls”
We are pleased to announce that our next Lunch & Learn will take place on May 25, 2021 from 12:30 to 13:30.
This Lunch and Learn proposes to discuss the results of our Detranote"A Heath-Jarrow-Morton model compliant with Solvency II? Promises and pitfalls"..
We will discuss a Heath-Jarrow-Morton model that is compliant with the Solvency II Directive, notably with the converge to a fixed long term level called the Ultimate Forward Rate (UFR). Adding such a feature has various consequences on the term structure of zero-coupon bond variances. It is for example shown that the shape of this term structure is fully determined by the function driving the convergence of forward rates to the UFR. Another interesting insight is that the zero-coupon bond variances converge at long term to zero under this model. More importantly, empirical illustrations do not allow to conclude to a fast convergence of the forward rates to the UFR questioning the feasibility of working with the current low interest rates market instruments but still aiming at an UFR of 3.75% beyond the last liquid point.
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The Detralytics Team
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