Search arXiv⌕ Search
Home/Archive/arXiv

arXiv · cond-mat/9712164

Phenomenology of the Interest Rate Curve

J. -P. Bouchaud·N. Sagna·R. Cont·N. El-Karoui·M. Potters
View original source ↗Read source document ↗Export metadata ↓

Abstract

This paper contains a phenomenological description of the whole U.S. forward rate curve (FRC), based on an data in the period 1990-1996. We find that the average FRC (measured from the spot rate) grows as the square-root of the maturity, with a prefactor which is comparable to the spot rate volatility. This suggests that forward rate market prices include a risk premium, comparable to the probable changes of the spot rate between now and maturity, which can be understood as a `Value-at-Risk' type of pricing. The instantaneous FRC however departs form a simple square-root law. The distortion is maximum around one year, and reflects the market anticipation of a local trend on the spot rate. This anticipated trend is shown to be calibrated on the past behaviour of the spot itself. We show that this is consistent with the volatility `hump' around one year found by several authors (and which we confirm). Finally, the number of independent components needed to interpret most of the FRC fluctuations is found to be small. We rationalize this by showing that the dynamical evolution of the FRC contains a stabilizing second derivative (line tension) term, which tends to suppress short scale distortions of the FRC. This shape dependent term could lead, in principle, to arbitrage. However, this arbitrage cannot be implemented in practice because of transaction costs. We suggest that the presence of transaction costs (or other market `imperfections') is crucial for model building, for a much wider class of models becomes eligible to represent reality.

Explore related subjects

cond-mat.stat-mechq-fin.ST

Keep this discovery

Explore connections, maps & timelines

BibTeXRIS

J. -P. Bouchaud, N. Sagna, R. Cont, N. El-Karoui, M. Potters. 1997-12-15. Phenomenology of the Interest Rate Curve. https://arxiv.org/abs/cond-mat/9712164

Cite the original work for its findings. Save a collection to share your selection of sources.

KEEP EXPLORING

Related papers

arXiv2026

Direct Experimental Test of Conformal Invariance via Grazing Scattering: A Proposal for X-ray and Neutron Experiments

We propose a test of conformal invariance in critical phenomena based on the study of a two-point correlation function in the presence of a boundary. This two-point function can be studied using X-ray or neutron scattering in the conditions of total reflection (so-called grazing scattering). The conformal Ward identity in momentum space is here expressed as a differential constraint on the scattering cross-section, as a function of the momentum transfer and the scattering angle. Experimental verification using X-rays and binary alloys appears well within the existing techniques, while feasibility for neutron scattering requires further study. This would be the first direct experimental test of conformal invariance in critical phenomena, a symmetry widely assumed but never directly verified.

cond-mat.stat-mech↗
arXiv2026

Thermodynamic and statistical properties of a multifractional modified dispersion relation via the grand-canonical ensemble

We study the thermodynamic and statistical properties of a gas governed by a multifractional modified dispersion relation of the form $ω^{2}=k^{2}+4E_{*}^{-1/2}k^{5/2}$, where $E_{*}$ sets the characteristic scale of the multifractional correction. Working within the grand-canonical ensemble, we derive the modified density of states, the grand potential, the partition function, and the main thermodynamic quantities for both bosonic and fermionic sectors. The deformation changes the available phase-space distribution and produces nonstandard thermal scalings controlled by the ratio $T/E_{*}$. In the infrared regime, the usual relativistic gas behavior is recovered with leading corrections proportional to powers of $(T/E_{*})^{1/2}$. In the ultraviolet regime, the density of states scales as $\varrho(ω)\propto ω^{7/5}$, corresponding to an effective density-of-states dimension $d_{\mathrm{eff}}=12/5$. As a consequence, the Stefan-Boltzmann law is deformed from $u\propto T^{4}$ to $u\propto E_{*}^{3/5}T^{17/5}$, while the equation-of-state parameter approaches $w=5/12$ instead of the standard radiation value $w=1/3$. We also analyze thermal stability, particle number and energy fluctuations, Bose-Einstein condensation, and the degenerate Fermi gas limit. The multifractional correction increases the critical temperature of a conserved bosonic gas and modifies the Fermi energy, pressure, sound speed, and low-temperature heat capacity of degenerate fermions. A direct fit to the COBE/FIRAS monopole spectrum yields $E_{*}>0.36\,\mathrm{MeV}$ at $95\%$ CL, while the conservative GWTC--3 propagation constraint gives $E_{*}>1.18\times10^{19}\,\mathrm{GeV}$ at $90\%$ credibility when the dispersion relation is assumed to be universal.

cond-mat.stat-mech↗
arXiv2026

Foundations of Many-Body Theory of Quantum Unified Statistics: Green functions and Linear Response Theory

We develop a comprehensive many-body theory for systems of particles obeying quantum unified statistics, or quons. After exploring the properties of the Fock space of this system, we formulate a systematic S-matrix expansion and a generalized Wick's theorem. A consistent Green-function formalism is constructed at both zero and finite temperatures, accompanied by a generalized Wick's theorem appropriate for infinite-statistics operator algebras. Within this framework, we establish diagrammatic rules for interacting quon systems. Employing the random phase approximation, we derive the dielectric function and reveal the emergence of anomalous plasmon modes that have no direct counterpart in conventional Bose or Fermi systems. We further analyze the ground-state energy, energy-loss function, generalized Thomas-Fermi screening wave vectors, and Friedel oscillations, elucidating how infinite statistics qualitatively modifies collective behavior and screening properties.

cond-mat.stat-mech↗