High-dimensional parameter calibration of interest rate model for the Korean insurance capital standard
We propose a method for calibrating high-dimensional parameters in the Hull–White one-factor model using market prices of swaptions, aimed at generating mark-to-market interest rate scenarios in the Korean insurance industry. Our approach integrates a trust region-based Bayesian optimization techniq...
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| Main Authors: | , , |
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| Format: | Article |
| Language: | English |
| Published: |
Emerald Publishing
2025-03-01
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| Series: | Seonmul yeongu |
| Subjects: | |
| Online Access: | https://www.emerald.com/insight/content/doi/10.1108/JDQS-07-2024-0031/full/pdf |
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| Summary: | We propose a method for calibrating high-dimensional parameters in the Hull–White one-factor model using market prices of swaptions, aimed at generating mark-to-market interest rate scenarios in the Korean insurance industry. Our approach integrates a trust region-based Bayesian optimization technique with a parameter space decomposition method to solve the calibration problem. Empirical studies demonstrate that our method achieves superior stability and effectiveness in calibrating high-dimensional parameters compared to conventional Bayesian optimization approaches. |
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| ISSN: | 1229-988X 2713-6647 |