Download or read book Term Structure Models written by Damir Filipovic and published by Springer Science & Business Media. This book was released on 2009-07-28 with total page 259 pages. Available in PDF, EPUB and Kindle. Book excerpt: Changing interest rates constitute one of the major risk sources for banks, insurance companies, and other financial institutions. Modeling the term-structure movements of interest rates is a challenging task. This volume gives an introduction to the mathematics of term-structure models in continuous time. It includes practical aspects for fixed-income markets such as day-count conventions, duration of coupon-paying bonds and yield curve construction; arbitrage theory; short-rate models; the Heath-Jarrow-Morton methodology; consistent term-structure parametrizations; affine diffusion processes and option pricing with Fourier transform; LIBOR market models; and credit risk. The focus is on a mathematically straightforward but rigorous development of the theory. Students, researchers and practitioners will find this volume very useful. Each chapter ends with a set of exercises, that provides source for homework and exam questions. Readers are expected to be familiar with elementary Itô calculus, basic probability theory, and real and complex analysis.
Download or read book Affine Term Structure Models written by Christian Gouriéroux and published by . This book was released on 2002 with total page 66 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Specification Analysis of Affine Term Structure Models written by Qiang Dai and published by . This book was released on 1997 with total page 51 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper characterizes, interprets, and tests the over-identifying restrictions imposed in affine models of the term" structure. Letting r(t) = ë Y(t), where Y is an unobserved vector affine process, our analysis proceeds in three steps. First, we show that affine models can be categorized according to the different over-identifying restrictions they impose on (i) ë, and (ii) the parameters of the diffusion matrices. Second, this formulation is shown to be equivalent to a model in which there is a terraced drift structure with one of the state variables being the stochastic long-run mean of r. This equivalence allows direct comparisons of the substantive restrictions on the dynamics of interest rates imposed in CIR-style models and models in which the state variables are the stochastic long-run mean and volatility of r. Third, we compute simulated method of moments estimates of a three-factor affine term structure model, and test the over-identifying restrictions on the joint distribution of long- and short-term interest rates implied by extant affine models of r. We find allowing for correlated factors is key to simultaneously describing the short and long ends of the yield curve. This finding is interpreted in terms of the properties of the risk factors underlying term structure movements
Download or read book Time series and Cross section Information in Affine Term Structure Models written by Frank de Jong and published by . This book was released on 1999 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Affine Term structure Models written by David Bolder and published by . This book was released on 2001 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt: Affine models describe the stylized time-series properties of the term structure of interest rates in a reasonable manner, they generalize relatively easily to higher dimensions, and a vast academic literature exists relating to their implementation. This combination of characteristics makes the affine class a natural introductory point for modelling interest rate dynamics. The author summarizes and synthesizes the theoretical and practical specifics relating to this analytically attractive class of models. This summary is accomplished in a self-contained manner with sufficient detail so that relatively few technical points will be left for the reader to ponder. As such, this paper represents a first step towards advancing the Bank of Canada's research agenda in this area, with a view to using these models to assist with practical debt and risk-management problems currently under study.
Download or read book Essays on Affine Term Structure Models written by Bovorn Vichiansin and published by . This book was released on 2006 with total page 116 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Affine Term Structure Models and Interest Rate Risk written by Mario Alessandro Maggi and published by . This book was released on 2001 with total page 116 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Affine Term Structure Models Theory Characterization and Estimation written by Anders Brandt Wulff-Andersen and published by . This book was released on 2000 with total page 100 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Affine Term Structure Models written by David Jamieson Bolder and published by . This book was released on 2008 with total page 68 pages. Available in PDF, EPUB and Kindle. Book excerpt: Affine models describe the stylized time-series properties of the term structure of interest rates in a reasonable manner, they generalize relatively easily to higher dimensions, and a vast academic literature exists relating to their implementation. This combination of characteristics makes the affine class a natural introductory point for modelling interest rate dynamics. The author summarizes and synthesizes the theoretical and practical specifics relating to this analytically attractive class of models. This summary is accomplished in a self-contained manner with sufficient detail so that relatively few technical points will be left for the reader to ponder. As such, this paper represents a first step towards advancing the Bank of Canada's research agenda in this area, with a view to using these models to assist with practical debt and risk-management problems currently under study.
Download or read book Identification of Maximal Affine Term Structure Models written by Pierre Collin-Dufresne and published by . This book was released on 2011 with total page 53 pages. Available in PDF, EPUB and Kindle. Book excerpt: Building on the approach of Duffie and Kan (1996) who use finite maturity yields as the state vector, we propose a new representation of affine models in which the state vector is composed of infinitesimal maturity yields and their quadratic covariations. Because these variables possess unambiguous economic interpretations, they generate a representation that is globally identifiable. Further, this representation is more flexible than the maximal model of Dai and Singleton (2000) in that there are more identifiable parameters. We implement this new representation for two different three-factor models. The fact that our state vector can be estimated model-independently from yield curve data presents advantages for the estimation and interpretation of multi-factor models.
Download or read book Long Memory Affine Term Structure Models written by Adam Golinski and published by . This book was released on 2017 with total page 61 pages. Available in PDF, EPUB and Kindle. Book excerpt: We develop a Gaussian discrete time essentially affine term structure model with long memory state variables. This feature reconciles the strong persistence observed in nominal yields and inflation with the theoretical implications of affine models, especially for long maturities. We characterise in closed-form the dynamic and cross-sectional implications of long memory for our model. We explain how long memory can naturally arise within the term structure of interest rates, providing a theoretical underpinning for our model. Despite the infinite-dimensional structure that long memory implies, we show how to cast the model in state space and estimate it by maximum likelihood. An empirical application of our model is presented.
Download or read book Affine Term Structure Models written by Jan Aarre Midtgaard and published by . This book was released on 2004 with total page 101 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Direct Estimation of the Risk Neutral Factor Dynamics of Affine Term Structure Models written by Dennis Bams and published by . This book was released on 1998 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Identification and Estimation of Maximal Affine Term Structure Models written by Pierre Collin-Dufresne and published by . This book was released on 2011 with total page 62 pages. Available in PDF, EPUB and Kindle. Book excerpt: We propose a canonical representation for affine term structure models where the state vector is comprised of the first few Taylor-series components of the yield curve and their quadratic (co-)variations. With this representation: (i) the state variables have simple physical interpretations such as level, slope and curvature, (ii) their dynamics remain affine and tractable, (iii) the model is by construction 'maximal' (i.e., it is the most general model that is econometrically identifiable), and (iv) model-insensitive estimates of the state vector process implied from the term structure are readily available. (Furthermore, this representation may be useful for identifying the state variables in a squared-Gaussian framework where typically there is no one-to-one mapping between observable yields and latent state variables). We find that the 'unrestricted' A1(3) model of Dai and Singleton (2000) estimated by 'inverting' the yield curve for the state variables generates volatility estimates that are negatively correlated with the time series of volatility estimated using a standard GARCH approach. This occurs because the 'unrestricted' A1(3) model imposes the restriction that the volatility state variable is simultaneously a linear combination of yields (i.e., it impacts the cross-section of yields), and the quadratic variation of the spot rate process (i.e., it impacts the time-series of yields). We then investigate the A1(3) model which exhibits 'unspanned stochastic volatility' (USV). This model predicts that the cross section of bond prices is independent of the volatility state variable, and hence breaks the tension between the time-series and cross-sectional features of the term structure inherent in the unrestricted model. We find that explicitly imposing the USV constraint on affine models significantly improves the volatility estimates, while maintaining a good fit cross-sectionally.
Download or read book Extended Affine Term Structure Models written by Marco Realdon and published by . This book was released on 2011 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper studies the family of quot;extendedquot; affine term structure models (EATSM), whereby the solution for a discount bond prices involves separation of variables and finite difference numerical solutions. As quadratic term structure models, EATSM are unaffected by the admissibility restrictions that affect affine models. The short interest rate is non-negative, hetero-schedastic and driven by latent factors that may be positively as well negatively correlated. If the factors are positively correlated, bond yields are sufficient statistics to infer the latent factors, which makes EATSM more amenable to estimation than quadratic models. A three-factor EASTM fits observed German Government bond yields well. Trade-offs between desirable model requirements are highlighted. A family of EATSM is also presented that does not restrict the short interest rate to be always positive. The instantaneous correlation between latent factors can itself follow a stochastic process.
Download or read book Dynamic Term Structure Modeling written by Sanjay K. Nawalkha and published by John Wiley & Sons. This book was released on 2007-05-23 with total page 722 pages. Available in PDF, EPUB and Kindle. Book excerpt: Praise for Dynamic Term Structure Modeling "This book offers the most comprehensive coverage of term-structure models I have seen so far, encompassing equilibrium and no-arbitrage models in a new framework, along with the major solution techniques using trees, PDE methods, Fourier methods, and approximations. It is an essential reference for academics and practitioners alike." --Sanjiv Ranjan Das Professor of Finance, Santa Clara University, California, coeditor, Journal of Derivatives "Bravo! This is an exhaustive analysis of the yield curve dynamics. It is clear, pedagogically impressive, well presented, and to the point." --Nassim Nicholas Taleb author, Dynamic Hedging and The Black Swan "Nawalkha, Beliaeva, and Soto have put together a comprehensive, up-to-date textbook on modern dynamic term structure modeling. It is both accessible and rigorous and should be of tremendous interest to anyone who wants to learn about state-of-the-art fixed income modeling. It provides many numerical examples that will be valuable to readers interested in the practical implementations of these models." --Pierre Collin-Dufresne Associate Professor of Finance, UC Berkeley "The book provides a comprehensive description of the continuous time interest rate models. It serves an important part of the trilogy, useful for financial engineers to grasp the theoretical underpinnings and the practical implementation." --Thomas S. Y. Ho, PHD President, Thomas Ho Company, Ltd, coauthor, The Oxford Guide to Financial Modeling
Download or read book Continuous time Identification of Exponential affine Term Structure Models written by Arianto Wibowo and published by . This book was released on 2006 with total page 79 pages. Available in PDF, EPUB and Kindle. Book excerpt:
