| Title | Machine learning Vasicek model calibration with Gaussian processes |
| Publication Type | Unpublished |
| Year of Publication | 2010 |
| Authors | Sousa BJ, Esquível ML, Gaspar RM |
| Series Title | Preprint |
| Keywords | Arbitrage free risk neutral measure, Calibration, Gaussian processes for machine learning, Vasicek interest rate model, Zero coupon bond prices |
| Abstract | In this paper we calibrate the Vasicek interest rate model under the risk neutral measure by learning the model parameters using Gaussian processes for machine learning regression. The calibration is done by maximizing the likelihood of zero coupon bond log prices, using zero coupon bond log prices mean and covariance functions computed analytically, as well as likelihood derivatives with respect to the parameters. The maximization method used is the conjugate gradients. The only prices needed for calibration are zero coupon bond prices and the parameters are directly obtained in the arbitrage free risk neutral measure. |
| URL | http://www.dm.fct.unl.pt/sites/www.dm.fct.unl.pt/files/preprints/2010/4_10.pdf |
