Construction of an interest rate model from statistical data

This presentation describes a method of processing signals from financial markets. We analyze yields to maturity of Treasury securities. The obtained statistical model can be used as a framework for generating signals for trading and risk management of interest rate derivative products in different market environments from high frequency to low frequency. We discuss the advantages and the trade-offs of low-dimensional parameterization of the market data. We discuss important steps from the statistical description to a signal processing framework for arbitrage-free analysis of financial derivative products. This presentation is based on the real experience that the author has had in the financial industry for many years as quantitative researcher, quantitative trader and risk manager. We thank the reviewers for constructive comments.