The Role of the Risk-Neutral Jump Size Distribution in Single-Factor Interest Rate Models

RMSE with the different approaches for the <svg height="8.45736pt" id="M130" style="vertical-align:-0.2129202pt" version="1.1" viewbox="-0.0498162 -8.24444 25.5187 8.45736" width="25.5187pt" xmlns="http://www.w3.org/2000/svg" xmlns:xlink="http://www.w3.org/1999/xlink"><g transform="matrix(.013,0,0,-0.013,0,0)"><path d="M158 548H390L417 615L410 623H122L83 318C106 326 142 337 185 337C296 337 350 275 350 188C350 116 308 42 225 42C165 42 121 74 100 93C89 101 83 99 72 92C60 81 51 68 50 59C47 46 51 39 66 24C82 9 125 -12 172 -12C225 -11 291 15 346 59C409 108 437 166 437 226C437 309 370 397 242 397C214 397 170 382 133 369L158 548Z" id="g58-51"></path><glyph.data ascent="1007" descent="-369" horiz-adv-x="487" vert-adv-y="487"></glyph.data></g><g transform="matrix(.013,0,0,-0.013,6.331,0)"><path d="M245 635C92 635 37 457 37 312C37 148 92 -12 244 -12C395 -12 449 165 449 312C449 469 394 635 245 635ZM243 598C332 598 358 454 358 312C358 172 334 26 245 26C158 26 128 174 128 313S151 598 243 598Z" id="g58-46"></path><glyph.data ascent="1007" descent="-369" horiz-adv-x="487" vert-adv-y="487"></glyph.data></g><g transform="matrix(.013,0,0,-0.013,12.662,0)"><path d="M245 635C92 635 37 457 37 312C37 148 92 -12 244 -12C395 -12 449 165 449 312C449 469 394 635 245 635ZM243 598C332 598 358 454 358 312C358 172 334 26 245 26C158 26 128 174 128 313S151 598 243 598Z" id="g58-46"></path><glyph.data ascent="1007" descent="-369" horiz-adv-x="487" vert-adv-y="487"></glyph.data></g><g transform="matrix(.013,0,0,-0.013,18.993,0)"><path d="M245 635C92 635 37 457 37 312C37 148 92 -12 244 -12C395 -12 449 165 449 312C449 469 394 635 245 635ZM243 598C332 598 358 454 358 312C358 172 334 26 245 26C158 26 128 174 128 313S151 598 243 598Z" id="g58-46"></path><glyph.data ascent="1007" descent="-369" horiz-adv-x="487" vert-adv-y="487"></glyph.data></g></svg> simulated yield curves with <svg height="8.80966pt" id="M131" style="vertical-align:-0.2129202pt" version="1.1" viewbox="-0.0498162 -8.59674 51.9596 8.80966" width="51.9596pt" xmlns="http://www.w3.org/2000/svg" xmlns:xlink="http://www.w3.org/1999/xlink"><g transform="matrix(.013,0,0,-0.013,0,0)"><path d="M870 650H622L613 619C694 615 708 606 708 559C708 531 702 477 686 396L636 136H633L281 650H127L120 619C180 616 198 611 212 592C227 572 232 558 220 503L166 254C148 169 139 131 126 89C112 43 85 35 33 32L24 0H280L286 32C208 37 189 44 189 93C189 124 198 179 212 250L267 526H271L622 -8H655L732 396C747 477 762 532 770 556C785 600 798 616 862 619L870 650Z" id="g50-79"></path><glyph.data ascent="3443" descent="-2856" horiz-adv-x="888" vert-adv-y="888"></glyph.data></g><g transform="matrix(.013,0,0,-0.013,14.754,0)"><path d="M556 331V384H55V331H556ZM556 140V193H55V140H556Z" id="g54-34"></path><glyph.data ascent="3443" descent="-2856" horiz-adv-x="611" vert-adv-y="611"></glyph.data></g><g transform="matrix(.013,0,0,-0.013,26.373,0)"><path d="M453 623H65C60 580 57 531 46 472H80C104 539 109 548 175 548H389C309 380 194 169 90 0L98 -12L175 -2C274 207 366 407 462 610L453 623Z" id="g58-53"></path><glyph.data ascent="1007" descent="-369" horiz-adv-x="487" vert-adv-y="487"></glyph.data></g><g transform="matrix(.013,0,0,-0.013,32.704,0)"><path d="M158 548H390L417 615L410 623H122L83 318C106 326 142 337 185 337C296 337 350 275 350 188C350 116 308 42 225 42C165 42 121 74 100 93C89 101 83 99 72 92C60 81 51 68 50 59C47 46 51 39 66 24C82 9 125 -12 172 -12C225 -11 291 15 346 59C409 108 437 166 437 226C437 309 370 397 242 397C214 397 170 382 133 369L158 548Z" id="g58-51"></path><glyph.data ascent="1007" descent="-369" horiz-adv-x="487" vert-adv-y="487"></glyph.data></g><g transform="matrix(.013,0,0,-0.013,39.035,0)"><path d="M245 635C92 635 37 457 37 312C37 148 92 -12 244 -12C395 -12 449 165 449 312C449 469 394 635 245 635ZM243 598C332 598 358 454 358 312C358 172 334 26 245 26C158 26 128 174 128 313S151 598 243 598Z" id="g58-46"></path><glyph.data ascent="1007" descent="-369" horiz-adv-x="487" vert-adv-y="487"></glyph.data></g><g transform="matrix(.013,0,0,-0.013,45.366,0)"><path d="M245 635C92 635 37 457 37 312C37 148 92 -12 244 -12C395 -12 449 165 449 312C449 469 394 635 245 635ZM243 598C332 598 358 454 358 312C358 172 334 26 245 26C158 26 128 174 128 313S151 598 243 598Z" id="g58-46"></path><glyph.data ascent="1007" descent="-369" horiz-adv-x="487" vert-adv-y="487"></glyph.data></g></svg> and <svg height="11.4781pt" id="M132" style="vertical-align:-2.18977pt" version="1.1" viewbox="-0.0498162 -9.28833 59.5018 11.4781" width="59.5018pt" xmlns="http://www.w3.org/2000/svg" xmlns:xlink="http://www.w3.org/1999/xlink"><g transform="matrix(.013,0,0,-0.013,0,0)"><path d="M610 0V27L347 666L316 657L46 26V0H610ZM504 54H116L310 537L504 54Z" id="g50-133"></path><glyph.data ascent="3443" descent="-2856" horiz-adv-x="654" vert-adv-y="654"></glyph.data></g><g transform="matrix(.013,0,0,-0.013,8.496,0)"><path d="M329 433H203L239 587L230 596L147 534L123 433H57L30 395L34 388H115L61 129C37 16 59 -12 85 -12C147 -12 222 58 260 98L241 125C212 95 160 62 144 62C132 62 127 71 138 126L192 386L305 394L329 433Z" id="g50-117"></path><glyph.data ascent="3443" descent="-2856" horiz-adv-x="347" vert-adv-y="347"></glyph.data></g><g transform="matrix(.013,0,0,-0.013,16.682,0)"><path d="M556 331V384H55V331H556ZM556 140V193H55V140H556Z" id="g54-34"></path><glyph.data ascent="3443" descent="-2856" horiz-adv-x="611" vert-adv-y="611"></glyph.data></g><g transform="matrix(.013,0,0,-0.013,28.301,0)"><path d="M389 0V32C297 37 291 46 291 118V635C234 612 176 595 109 583V556L161 554C203 551 207 548 207 497V118C207 46 201 37 110 32V0H389Z" id="g58-47"></path><glyph.data ascent="1007" descent="-369" horiz-adv-x="487" vert-adv-y="487"></glyph.data></g><g transform="matrix(.013,0,0,-0.013,34.632,0)"><path d="M381 704H317L48 -163H112L381 704Z" id="g50-48"></path><glyph.data ascent="3443" descent="-2856" horiz-adv-x="429" vert-adv-y="429"></glyph.data></g><g transform="matrix(.013,0,0,-0.013,40.214,0)"><path d="M414 144C384 79 371 75 317 75H135L276 221C367 317 408 376 408 465C408 569 328 635 237 635C178 635 131 610 100 575L42 494L67 471C94 511 138 565 205 565C277 565 321 518 321 435C321 348 259 269 195 195C146 136 89 82 33 26V0H411C423 44 433 88 446 135L414 144Z" id="g58-48"></path><glyph.data ascent="1007" descent="-369" horiz-adv-x="487" vert-adv-y="487"></glyph.data></g><g transform="matrix(.013,0,0,-0.013,46.545,0)"><path d="M158 548H390L417 615L410 623H122L83 318C106 326 142 337 185 337C296 337 350 275 350 188C350 116 308 42 225 42C165 42 121 74 100 93C89 101 83 99 72 92C60 81 51 68 50 59C47 46 51 39 66 24C82 9 125 -12 172 -12C225 -11 291 15 346 59C409 108 437 166 437 226C437 309 370 397 242 397C214 397 170 382 133 369L158 548Z" id="g58-51"></path><glyph.data ascent="1007" descent="-369" horiz-adv-x="487" vert-adv-y="487"></glyph.data></g><g transform="matrix(.013,0,0,-0.013,52.876,0)"><path d="M245 635C92 635 37 457 37 312C37 148 92 -12 244 -12C395 -12 449 165 449 312C449 469 394 635 245 635ZM243 598C332 598 358 454 358 312C358 172 334 26 245 26C158 26 128 174 128 313S151 598 243 598Z" id="g58-46"></path><glyph.data ascent="1007" descent="-369" horiz-adv-x="487" vert-adv-y="487"></glyph.data></g></svg>.

Abstract and Applied Analysis

tab1

Table 1

Table 1: The Role of the Risk-Neutral Jump Size Distribution in Single-Factor Interest Rate Models 