Download or read book Canonical Term Structure Models with Observable Factors and the Dynamics of Bond Risk Premia written by Marcello Pericoli and published by . This book was released on 2008 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: We derive a canonical representation for the no-arbitrage discrete-time term structure models with both observable and unobservable state variables, popularized by Ang and Piazzesi (2003). We conduct a specification analysis based on this canonical representation and we analyze how alternative parametrizations affect estimated risk premia, impulse response functions and variance decompositions. We find a trade-off between the need to obtain parsimonious parametrizations and the ability of the models to match observed patterns of variation in risk premia. We also find that more richly parametrized models uncover a greater influence of macroeconomic fundamentals on the long-end of the yield curve.
Download or read book Canonical Term Structure Models with Observable Factors and the Dynamics of Bond Risk Premiums written by Marcello Pericoli and published by . This book was released on 2008 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study the dynamics of risk premiums on the German bond market, employing no-arbitrage term-structure models with both observable and unobservable state variables, recently popularized by Ang and Piazzesi (2003). We conduct a specification analysis based on a new canonical representation for this class of models. We find that risk premiums display a considerable variability over time, are strongly counter-cyclical and bear no significant relation to inflation.
Download or read book Canonical Term structure Models with Observable Factors and the Dynamics of Bond Risk Premiums written by Marcello Pericoli and published by . This book was released on 2006 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Canonical Term structure Models with Observable Factors and the Dynamics of Bond Risk Premiums written by Marcello Pericoli and published by . This book was released on 2006 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study the dynamics of risk premiums on the German bond market, employing no-arbitrage term-structure models with both observable and un-observable state variables, recently popularized by Ang and Piazzesi (2003). We conduct a specification analysis based on a new canonical representation for this class of models. We find that risk premiums display a considerable variability over time, are strongly counter-cyclical and bear no significant relation to inflaiton.
Download or read book Canoncial Term structure Models with Observable Factors and the Dynamic of Bond Risk Premiums written by Marcello Pericoli and published by . This book was released on 2006 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book A New Perspective on Gaussian Dynamic Term Structure Models written by Scott Joslin and published by . This book was released on 2010 with total page 55 pages. Available in PDF, EPUB and Kindle. Book excerpt: In any canonical Gaussian dynamic term structure model (GDTSM), the conditional forecasts of the pricing factors are invariant to the imposition of no-arbitrage restrictions. This invariance is maintained even in the presence of a variety of restrictions on the factor structure of bond yields. To establish these results, we develop a novel canonical GDTSM in which the pricing factors are observable portfolios of yields. For our normalization, standard maximum likelihood algorithms converge to the global optimum almost instantaneously. We present empirical estimates and out-of-sample forecasts for several GDTSMs using data on U.S. Treasury bond yields. Taken together, our results shed new light on estimation and interpretation of GDTSMs, as well as the eff ects of di fferent specifi cations of the risk premiums and the risk-neutral distribution of bond yields on the observed dynamics of the yield curve.
Download or read book The Yield Curve and Financial Risk Premia written by Felix Geiger and published by Springer Science & Business Media. This book was released on 2011-08-17 with total page 320 pages. Available in PDF, EPUB and Kindle. Book excerpt: The determinants of yield curve dynamics have been thoroughly discussed in finance models. However, little can be said about the macroeconomic factors behind the movements of short- and long-term interest rates as well as the risk compensation demanded by financial investors. By taking on a macro-finance perspective, the book’s approach explicitly acknowledges the close feedback between monetary policy, the macroeconomy and financial conditions. Both theoretical and empirical models are applied in order to get a profound understanding of the interlinkages between economic activity, the conduct of monetary policy and the underlying macroeconomic factors of bond price movements. Moreover, the book identifies a broad risk-taking channel of monetary transmission which allows a reassessment of the role of financial constraints; it enables policy makers to develop new guidelines for monetary policy and for financial supervision of how to cope with evolving financial imbalances.
Download or read book Stochastic Discount Factor Models of the Term Structure written by and published by . This book was released on 2005 with total page 226 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Bond Risk Premia and Gaussian Term Structure Models written by Bruno Feunou and published by . This book was released on 2014 with total page 47 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Developments in Macro Finance Yield Curve Modelling written by Jagjit S. Chadha and published by Cambridge University Press. This book was released on 2014-02-06 with total page 571 pages. Available in PDF, EPUB and Kindle. Book excerpt: State-of-the-art research from academics and policymakers on the role of and challenges to monetary policy during the ongoing financial crisis.
Download or read book A Review of the Dynamic Default Free Term Structure Models written by Ako Doffou and published by . This book was released on 2013 with total page 27 pages. Available in PDF, EPUB and Kindle. Book excerpt: Enormous progress has been made by academics and finance practitioners alike in modeling the dynamics of the term structure of interest rates in the past 35 years. This paper extends Yan (2001). The dynamics of the term structure of interest rates are critical in assessing prices and hedging portfolios of fixed-income derivative instruments. This paper reviews the theoretical development of the dynamic models of the default-free term structure and their applications in pricing interest rate options. Equilibrium models and their multifactor extensions are examined. These models offer the economic intuition linking the term structure to economic fundamentals. These models also constitute a framework of the arbitrage models which price interest rate derivatives using the market prices of bonds. Recent studies expand this framework, directly model observable market rates, incorporate an internally consistent correlation structure, use pricing factors as observable portfolios of zero-coupon yields acting as state variables, offer a discrete time setting with recursive closed form solutions for zero coupon bonds, have unconstrained state dependence of the market prices of risk, build in smoothness restrictions on the factor loadings, and are driven by state vectors with unspanned macro risks.
Download or read book A Beta Based Framework for Lower Bond Risk Premia written by Stefano Nobili and published by . This book was released on 2008 with total page 68 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book On the Estimation of Term Structure Models and An Application to the United States written by International Monetary Fund and published by International Monetary Fund. This book was released on 2010-11-01 with total page 64 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper discusses the estimation of models of the term structure of interest rates. After reviewing the term structure models, specifically the Nelson-Siegel Model and Affine Term- Structure Model, this paper estimates the terms structure of Treasury bond yields for the United States with pre-crisis data. This paper uses a software developed by Fund staff for this purpose. This software makes it possible to estimate the term structure using at least nine models, while opening up the possibility of generating simulated paths of the term structure.
Download or read book Stochastic Correlation and Risk Premia in Term Structure Models written by Carl Chiarella and published by . This book was released on 2016 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper analyzes a term structure model that allows for both stochastic correlation between underlying factors and an extended market price of risk specification. We show that significant improvement in bond fitting and portfolio performance is obtained by the model. However, the restriction on market price of risk has a more negative impact on bond price fitting and forecasting, whereas the restriction on correlated factors has a more negative impact on hedging performance. The model has good predictive power for bond risk premia. Once our model factors are taken into account, other predictive factors become insignificant.
Download or read book Stability of the Financial System written by Andreas R. Dombret and published by Edward Elgar Publishing. This book was released on 2013-01-01 with total page 556 pages. Available in PDF, EPUB and Kindle. Book excerpt: ÔFinancial stability is necessary. To achieve this common target an on-going dialogue is required between industry, policymakers, academia and other relevant stakeholders. This book provides a welcome and refreshing perspective from different standpoints on the issues at stake, and reminds us of the remaining work ahead.Õ Ð Axel Weber, Chair of Supervisory Board, UBS ÔSince 2008, financial stability has moved to the center of the policy stage. This volume, combining contributions from leading policy makers and academics, is the essential introduction to the issues. Must reading.Õ Ð Barry Eichengreen, George C. Pardee and Helen N. Pardee Professor of Economics and Political Science, University of California, Berkeley, US ÔThere was a world BC (Before Crisis) and there will be a world AD (After Deleveraging) Ð the challenge is to create an effective, efficient yet stable and sustainable financial system for this Ònew worldÓ. This book provides the most comprehensive and thought-provoking basis for action I have seen so far.Õ Ð Paul Achleitner, Chair of Supervisory Board Deutsche Bank AG ÔFinancial stability is an overarching goal. In open and democratic societies, ensuring financial stability is a matter of interest not only to central bankers, academics and financial market players, but also to all well-informed citizens. This book provides an excellent basis for a wide-ranging and rewarding debate.Õ Ð Thomas J. Jordan, Chairman of the Governing Board of the Swiss National Bank ÔThe financial crisis demonstrated conclusively that for central bankers and other policymakers financial stability must always be of paramount concern, for without it the macroeconomy will perform badly and monetary policy will lose its effectiveness. This book underscores the importance of financial stability, laying out the key issues and what must be done to avoid such disasters in the future.Õ Ð William C. Dudley, President of the Federal Reserve Bank of New York, US In the aftermath of the financial crisis, new financial market regulation is being implemented, and increasing numbers of countries are establishing new legislation for macroprudential oversight. Against this backdrop, this thought provoking book provides a platform for the leading international experts to discuss and encourage future debate on financial stability. The breadth and scope of the issues addressed reflect the challenge of developing and consistently implementing a coherent set of financial reforms to promote financial stability. The book advocates the development of financial reforms that are effective in striking the optimal balance between realizing the enormous benefits of efficient financial intermediation, capital allocation and risk management on the one hand, and controlling systemic risks and maintaining financial stability on the other. Making an important contribution to deepening our understanding of the many facets of financial stability, this book will prove a challenging read for policy makers, regulators and central bankers as well as for researchers and scholars in the fields of economics, money, finance and banking.
Download or read book Switching Varma Term Structure Models written by Alain Monfort and published by . This book was released on 2010 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The purpose of this article is to propose a global discrete-time modeling of the term structure of interest rates which is able to capture simultaneously the following important features: (i) a historical dynamics of the factor driving term structure shapes involving several lagged values, and switching regimes; (ii) a specification of the stochastic discount factor (SDF) with time-varying and regime-dependent risk-premia; (iii) explicit or quasi explicit formulas for zero-coupon bond (ZCB) and interest rate derivative prices. We develop the switching autoregressive normal (SARN) and the switching vector autoregressive normal (SVARN) Factor-Based Term Structure Models of order p. The factor is considered as a latent variable or an observable variable: in the second case the factor is a vector of several yields. Regime shifts are described by a Markov chain with (historical) nonhomogeneous transition probabilities. An empirical analysis of bivariate VAR(p) and SVARN(p) Factor-Based Term Structure Models, using monthly observations of the U.S. term structure of interest rates, and a goodness-of-fit and expectation hypothesis puzzle comparison with competing models in the literature, shows the determinant role played by the observable nature of the factor, lags, and switching regimes in the term structure modeling.
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
