# A stochastic control perspective on term structure models with roll-over risk

arXiv: https://arxiv.org/abs/2304.04453 · HTML: https://mlsanity.com/paper/2304.04453/

## Key facts

- Cited by 1 papers in the map (data through 14 Oct 2026).
- First posted on arXiv 10 Apr 2023.

## Built on by (most cited first, 1 of 1)

- [Arbitrage-Free Bond and Yield Curve Forecasting with Neural Filters under HJM Constraints](https://mlsanity.com/paper/2511.17892/) (2025)

## Abstract (arXiv)

In this paper, we consider a generic interest rate market in the presence of roll-over risk, which generates spreads in spot/forward term rates. We do not require classical absence of arbitrage and rely instead on a minimal market viability assumption, which enables us to work in the context of the benchmark approach. In a Markovian setting, we extend the control theoretic approach of Gombani & Runggaldier (2013) and derive representations of spot/forward spreads as value functions of suitable stochastic optimal control problems, formulated under the real-world probability and with power-type objective functionals. We determine endogenously the funding-liquidity spread by relating it to the risk-sensitive optimization problem of a representative investor.