A probabilistic approach to the term structure of interest rates: applications to interest rate risk management.

Summary The thesis is a set of six articles, all centered around the term structure of interest rates and interest rate risk management. The first article proposes a framework for managing a portfolio of interest rate derivatives. After identifying the appropriate risk factors, the sensitivity matrix of the portfolio is constructed and single factor speculation strategies are highlighted. The second and third papers study the notional bond future contract, both in terms of comparing the volatilities of prices and futures during the opening and closing periods of the markets and also to study the effectiveness of this future contract in hedging and optimal asset allocation problems. The fourth paper reviews the latest techniques for global balance sheet risk management while the fifth paper uses arbitrage arguments to evaluate the interest rate risk and margin risk of floating rate instruments. The last paper introduces a risk-neutral probability to obtain a simple expression for the value of a call or forward price of any financial asset.