Advanced frameworks for managing interest rate risk in banking investment portfolios

Posted: Jan 18, 2021

• Prof. Natalie Laurent
• Prof. Samuel Laurent
• Prof. Sofia Kimura

Abstract

This research addresses limitations of traditional interest rate risk management approaches by introducing a fundamentally new approach that draws inspiration from quantum computing principles and integrates them with advanced machine learning techniques. The framework models interest rate movements as existing in a superposition of states, similar to quantum systems, rather than following a single probabilistic path, allowing for better capture of non-linear dynamics, regime changes, and tail risks in modern financial markets.