Mathematical Analysis and Calibration of a Multifactor Panel Model for Credit Spreads and Risk-free Interest Rate
Ľuboš Šesták
PhD thesis advisor: Daniel Ševčovič

PhD thesis - Full text    (PDF 2.7 M)


Summary: In this thesis a new panel model is developed for the sovereign bond yields in the euro area. We assume that the short-rate of a particular euro area country is a sum of two unobserved underlying processes: the risk-free rate and a credit spread. The risk-free rate is common for all euro area countries, while the credit spread is idiosyncratic for every country. Both the risk-free rate and the credit spreads are modeled by the well-known one-factor Cox, Ingersoll, Ross or Chan, Karolyi, Longstaff, Sanders process. The model is calibrated using daily data on yield curves for the whole existence of the euro area until February 3, 2012 and the results are discussed.
Related papers

[1] P. Jurča a Ľ. Šesták: Aktuálny vývoj a riziká v slovenskom finančnom sektore, Biatec 19(9) 2011, 2-9. ISSN-1335-0900.

[2] T. Ambra, A. Málišová, Š. Nebeský, P. Paluš, P. Pénzeš a Ľ. Šesták: Aktuálny vývoj v oblasti európskej regulácie finančného trhu, Biatec 18(5) 2010, 2-7. ISSN-1335-0900.

[3] Ľ. Šesták: Multifactor interest rate model for the Euro area risk-free rate and credit spreads of the Euro area sovereigns and its calibration, submitted.