Download or read book Essays on the Government Bond Yield Curve written by Hussain Abusaaq and published by . This book was released on 2012 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: ABSTRACT: In practice, economist do not observe the discount function, spot or forward curves so we must extract them from a few observed points along the yield curve. To do this I introduce a new method called the Global Piecewise Quartic Polynomial Interpolation to construct maximally smooth forward curves with zero pricing errors for government coupon bonds. This method can construct any spot and forward curve shape with zero pricing errors, including upward sloping, downward sloping, inverted or humped. Next, I use three methods to decompose the constructed forward and the implied spot curves into factors and loadings: (i) the DL three-factor model, (ii) principal components and (iii) Chebyshev polynomial approximations. My analysis shows that the first three loadings for the spot curve and the first, the second and the fourth loadings in the forward curve can be interpreted as level, slope and curvature, respectively. Moreover, the methods show that five, or two additional, factors are needed to model the forward curve with the same precision as can be achieved with three factors for the spot curve. Simple and multiple correlations are used to analyze the relationships between the business cycle and the five factors that are needed to model the forward curve, the three factors needed to model the spot curve and the three factors of the [4] model. The results suggest that the additional factors required to model the forward curve are indeed related to the business cycle. The third factor on the principal components on the forward is a leading indicator for the trough and the fifth factor on the principal components on the forward is a leading indicator for the peak. Finally, ARIMA models are used to estimate and forecast the spot and forward curve factors. I find that forward curve factors produce more accurate forecasts than the three [4] factors.

Download or read book Essays on Monetary Policy and Financial Markets written by Matteo Leombroni and published by . This book was released on 2023 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis studies the interaction of monetary policy and financial markets. The thesis examines the impact of monetary policy shocks on the cross-section of bond prices (e.g., government and corporate bonds). It also analyzes how monetary policy interacts with the portfolios of financial intermediaries and households. In the first chapter, Heterogeneous Intermediaries and Bond Characteristics in the Transmission of Monetary Policy, together Federic Holm-Hadulla, we study the transmission of monetary policy to the corporate bond market. We show that corporate bond purchases by the central bank give rise to credit spread shocks, whereas government bond purchases mainly cause term spread shocks. The yields of bonds held by different intermediaries respond heterogeneously to the two shocks because intermediaries systematically select different types of bonds. We explain these findings through the lens of a model of the fixed-income market with multiple risk factors. Insurance companies and pension funds select into assets with high interest-rate risk exposure to match their long-duration liabilities. The mutual fund sector instead absorbs securities that carry credit risk. Different policy tools affect the market prices of risk factors differentially, thereby redistributing risks across intermediary sectors and ultimately across the households investing in them. In the second chapter, Central Bank Communication and the Yield Curve, with Andrea Vedolin, Gyuri Venter, and Paul Whelan, we study the interaction between monetary policy and sovereign bonds in the Euro area. We argue that monetary policy in the form of central bank communication can shape long-term interest rates by changing risk premia. Using high-frequency movements of default-free rates and equity, we show that monetary policy communications by the ECB on regular announcement days led to a significant yield spread between peripheral and core countries during the European sovereign debt crisis by increasing credit risk premia. We also show that central bank communication has a powerful impact on the yield curve outside of regular monetary policy days. In the third chapter, Household Portfolios, Monetary Policy, and Asset Prices, together with Ciaran Rogers, we examine the role of the household portfolio rebalancing channel for the aggregate and redistributive effects of monetary policy. The transmission of monetary policy works not only through regular income and substitution motives but also through an endogenous portfolio rebalancing effect that generates changes in equilibrium asset prices and a subsequent wealth effect on consumption.

Download or read book Essays on the Term Structure of Interest Rates written by Lance Alexander Fisher and published by . This book was released on 1988 with total page 392 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Yield Curve Modeling and Forecasting written by Francis X. Diebold and published by Princeton University Press. This book was released on 2013-01-15 with total page 223 pages. Available in PDF, EPUB and Kindle. Book excerpt: Understanding the dynamic evolution of the yield curve is critical to many financial tasks, including pricing financial assets and their derivatives, managing financial risk, allocating portfolios, structuring fiscal debt, conducting monetary policy, and valuing capital goods. Unfortunately, most yield curve models tend to be theoretically rigorous but empirically disappointing, or empirically successful but theoretically lacking. In this book, Francis Diebold and Glenn Rudebusch propose two extensions of the classic yield curve model of Nelson and Siegel that are both theoretically rigorous and empirically successful. The first extension is the dynamic Nelson-Siegel model (DNS), while the second takes this dynamic version and makes it arbitrage-free (AFNS). Diebold and Rudebusch show how these two models are just slightly different implementations of a single unified approach to dynamic yield curve modeling and forecasting. They emphasize both descriptive and efficient-markets aspects, they pay special attention to the links between the yield curve and macroeconomic fundamentals, and they show why DNS and AFNS are likely to remain of lasting appeal even as alternative arbitrage-free models are developed. Based on the Econometric and Tinbergen Institutes Lectures, Yield Curve Modeling and Forecasting contains essential tools with enhanced utility for academics, central banks, governments, and industry.

Download or read book Essays on Money and Credit written by Lars Meuller and published by . This book was released on 2000 with total page 142 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays on Return Predictability in Financial Markets written by Chan R. Mang and published by . This book was released on 2012 with total page 149 pages. Available in PDF, EPUB and Kindle. Book excerpt: My thesis examines return predictability in government bond markets and currency markets. In Chapter 1, I take the term structure model in Cochrane and Piazzesi (2008) and construct currency market prices. The implied currency market prices are then counterfactually volatile and predictable, at least with respect to commonly used predictor variables. Getting the model closer to currency market data means reducing bond risk compensation but doing so nearly eliminates predictability in bond markets. One way to generate sensible time-variation in bond and currency risk-premia allows the volatility of returns to be time-varying. In Chapter 2, I test if alternative forecast rules perform better than the return-forecasting factor of Cochrane and Piazzesi (2008). I compare forecasts assuming all historical data is available to recursively made ones that are revised with the arrival of news. Differences in the two forecast rules systematically move with realized bond risk-premia and forecast mean yield curve levels and short-term interest rates one year ahead not just for the U.S., but also for government bond markets of other industrialized economies. I show that lower long-term rates relative to short-rates in 2004-2005 is consistent with an expected a decline of interest rates by market participants. In Chapter 3, I show that the cross-sectional average spread in the return-forecasting factor of Cochrane and Piazzesi (2005, 2008) can forecast currency risk-premia. However, the return-forecasting factor spread consistent with real-time data does not forecast currency risk-premia. I also find that both currency risk-premia and exchange rate changes have a predictable component that is detected by the information gap, what I call the hidden FX market factor, between forecasts that take as given the full sample of data and those consistent with real-time availability. Controlling for large and transitory exchange rate changes using this information gap make interest rate differentials between the average foreign country and the U.S. positively correlated with dollar appreciation rates, delivering the right sign predicted by uncovered interest parity.

Download or read book The Cyclical Behavior of the Term Structure of Interest Rates written by Reuben A. Kessel and published by . This book was released on 1965 with total page 132 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays on United States based Global Government Bond Funds written by Sirapat Polwitoon and published by . This book was released on 2003 with total page 191 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Riding the Yield Curve Risk Taking Behavior in a Low Interest Rate Environment written by Mr.Ralph Chami and published by International Monetary Fund. This book was released on 2020-03-13 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt: Investors seek to hedge against interest rate risk by taking long or short positions on bonds of different maturities. We study changes in risk taking behavior in a low interest rate environment by estimating a market stochastic discount factor that is non-linear and therefore consistent with the empirical properties of cashflow valuations identified in the literature. We provide evidence that non-linearities arise from hedging strategies of investors exposed to interest rate risk. Capital losses are amplified when interest rates increase and risk averse investors have taken positions on instruments with longer maturity, expecting instead interest rates to revert back to their historical average.

Download or read book Three Essays on Media Content and Financial Markets written by Nina Gotthelf and published by . This book was released on 2017 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Three Essays on Econometrics written by Mijung Choi and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: In the first chapter titled, "A Factor Model for Functional Time Series", I construct a factor model for functional time series. Functions are infinite dimensional, and therefore, they have infinite dimensional features. I define functional factors as features affecting functional time series regularly and frequently. Other components are defined to be idiosyncratic since they only appear intermittently and sporadically. For determining the number of functional factors, asymptotic behaviors of the eigenvalues of the sample variance operator of the underlying functional time series are derived. I examine the time series of densities for the cross-sectional distributions of NYSE stock returns, and credit spread curves between US corporate bonds and Treasury bonds. In both examples, I find two functional factors characterize two main common features of the underlying functional time series. In the second chapter titled "A Factor Model for Functional Time Series with Unit Roots", I extend a factor model developed in the first chapter by allowing nonstationarity in the functional time series. I show functional factors and loadings can be consistently estimated after identifying potential unit roots subspace through functional principal component analysis. I apply the model to the U.S. yield curves and find the stationary fluctuations of the U.S. yield curves are mostly driven by curvature type of features. Also, I find one curvature feature appears regularly and is qualified being a functional factor.In the third chapter titled "A Factor Model for Functional Panels", I develop a factor model for functional panels with potentially large set of cross sections and time series. This model assumes that there are a finite number of common functional time series which keep generating response functions over time and its effects are non-trivial. I examine term structures of government bond yields for the US, the UK, Switzerland, Norway, South Korea, Germany, Canada and Australia. I find one global factor does exist and is important explaining fractions of variation in some country yield curves.

Download or read book Fiscal Deficits Public Debt and Sovereign Bond Yields written by Mr.Manmohan S. Kumar and published by International Monetary Fund. This book was released on 2010-08-01 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: The recent sharp increase in fiscal deficits and government debt in many countries raises questions regarding their impact on long-term sovereign bond yields. While economic theory suggests that this impact is likely to be adverse, empirical results have been less clear cut, have generally ignored nonlinear effects of deficits and debt through some other key determinants of yields, and have been mostly confined to advanced economies. This paper reexamines the impact of fiscal deficits and public debt on long-term interest rates during 1980 - 2008, taking into account a wide range of country-specific factors, for a panel of 31 advanced and emerging market economies. It finds that higher deficits and public debt lead to a significant increase in long-term interest rates, with the precise magnitude dependent on initial fiscal, institutional and other structural conditions, as well as spillovers from global financial markets. Taking into account these factors suggests that large fiscal deficits and public debts are likely to put substantial upward pressures on sovereign bond yields in many advanced economies over the medium term.

Download or read book Current Issues in Economics and Finance written by Bandi Kamaiah and published by Springer. This book was released on 2018-01-12 with total page 227 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book discusses wide topics related to current issues in economic growth and development, international trade, macroeconomic and financial stability, inflation, monetary policy, banking, productivity, agriculture and food security. It is a collection of seventeen research papers selected based on their quality in terms of contemporary topic, newness in the methodology, and themes. All selected papers have followed an empirical approach to address research issues, and are segregated in five parts. Part one covers papers related to fiscal and price stability, monetary policy and economic growth. The second part contains works related to financial integration, capital market volatility and macroeconomic stability. Third part deals with issues related to international trade and economic growth. Part four covers topics related to productivity and firm performance. The final part discusses issues related to agriculture and food security. The book would be of interest to researchers, academicians as a ready reference on current issues in economics and finance.

Download or read book Essays in Macroeconomic Policy written by Miranda S. Goeltom and published by Gramedia Pustaka Utama. This book was released on 2007 with total page 624 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays in International Finance and Applied Econometrics written by Marek Raczko and published by . This book was released on 2016 with total page 113 pages. Available in PDF, EPUB and Kindle. Book excerpt: The thesis consists of three essays in the fields of international finance and applied econometrics. The first chapter analyzes the co-movement of market premia for rare adverse events, addressing the important issue of contagion. The second chapter studies the impact of rare adverse events on the estimates of the risk-aversion coefficient and on household's portfolio composition. This chapter shows that the threat of a rare disaster justifies household's positive bond holdings. Finally, the last chapter studies if the information not contained in the domestic yield curve, but contained in the foreign yield curve helps to predict future dynamics of domestic yields. The first chapter proposes a novel approach to assessing volatility contagion across equity markets. More specifically I decompose the variance risk premia of three major stock indices into: crash and non-crash risk components and analyse their cross-market correlations. I find that crash-risk premia exhibit higher correlations than non-crash risk premia, implying the existence of volatility contagion. This suggests that investors believe that equity returns will be more highly correlated across countries during market crashes than during more normal times. The main result of the analysis holds when I apply other measures of co-movement as well as when I allow correlation to be time varying. Moreover I document that crash-premia constitute a large portion of the overall variance risk premia, highlighting the importance of crash-risks. Unlike the existing literature, my approach to testing the existence of volatility contagion does not rely on short periods of financial distress, but allows for crash-risk premia to be computed in tranquil times. The second chapter assesses the impact of the Peso problem on the econometric estimates of the risk aversion coefficient. Rietz (1988) and subsequently Barro (2006) showed that the introduction of the crash risk allows the canonical general equilibrium framework to generate data consistent equity premia even under low risk aversion of the representative agents. They argue that the original data used to calibrate these models suffer from a Peso problem (i.e. does not encounter a crash state). To the best of my knowledge the impact of their Peso problem on the estimation of the risk aversion coefficient has not to date been evaluated. This chapter seeks to remedy this. I find that crash states that are internalized by economic agents, but are not realized in the sample, generate only a small bias in the estimates of the risk aversion coe cient. I also show that the introduction of the crash state has a strong bearing on the household's portfolio composition. In fact, under the internalized crash state scenario, households exhibit positive bond holdings even in a frictionless environment. In the third chapter, co-authored with Andrew Meldrum and Peter Spencer, we show, using data on government bonds in Germany and the US, that overseas unspanned factors - constructed from the components of overseas yields that are uncorrelated with domestic yields - have significant explanatory power for subsequent domestic bond returns. This result is remarkably robust, holding for different sample periods, as well as out of sample. By adding our overseas unspanned factors to simple dynamic term structure models, we show that shocks to those factors have large and persistent effects on domestic yield curves. Dynamic term structure models that omit information about foreign bond yields are therefore likely to be mis-specified.

Download or read book Essays in Monetary Economics Collected Works of Harry Johnson written by Harry G. Johnson and published by Routledge. This book was released on 2013-07-18 with total page 284 pages. Available in PDF, EPUB and Kindle. Book excerpt: Reprinting the second edition (which included a new introduction explaining developments which had emerged since first publication) this book discusses explorations in the fundamental theory of a monetary economy, a theoretical critique of the ‘Phillips Curve’ approach to the theory of inflation and the theory of the term structure of interest rates in terms of the theory of forward markets pioneered by David Meiselman.

Download or read book Essays on Money Banking and Regulation written by C.J.M Kool and published by Springer Science & Business Media. This book was released on 2012-12-06 with total page 252 pages. Available in PDF, EPUB and Kindle. Book excerpt: Essays on Money, Banking and Regulation honors the interests and achievements of the Dutch economist Conrad Oort. The book is divided into four parts. Part 1 - Fiscal and monetary policy - reviews a variety of topics ranging from the measurement of money to the control and management of government expenditures. Part 2 - International institutions and international economic policy - looks at the international dimension of monetary and fiscal policy, with extensive discussion of the International Monetary Fund and the European Monetary Union. Part 3 - The future of international banking and the financial sector in the Netherlands - is an insider's view of the strategic choices facing financial institutions in the near future. Finally, Part 4 - Taxation and reforms in the Dutch tax system - is closest to Oort's research and practice since he has become known as an architect of the 1990 Dutch tax reform; this part is dedicated in particular to the tax reforms suggested by Oort.