Term Structure Models in Multistage Stochastic Programming: Estimation and Approximation

@article{Frauendorfer2000TermSM,
  title={Term Structure Models in Multistage Stochastic Programming: Estimation and Approximation},
  author={Karl Frauendorfer and Michael Sch{\"u}rle},
  journal={Annals OR},
  year={2000},
  volume={100},
  pages={189-209}
}
This paper investigates some common interest rate models for scenario generation in financial applications of stochastic optimization. We discuss conditions for the underlying distributions of state variables which preserve convexity of value functions in a multistage stochastic program. Oneand multi-factor term structure models are estimated based on historical data for the Swiss Franc. An analysis of the dynamic behavior of interest rates generated with these models reveals several… CONTINUE READING

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