Download or read book Estimating the Term Structure of Interest Rate Volatility in Extreme Values written by Turan G. Bali and published by . This book was released on 2012 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper proposes an extreme value approach to estimating the term structure of interest rate volatility, and shows that the volatility of interest rate changes is overestimated by the standard approach that uses the thin-tailed normal distribution. The volatility of maximal and minimal changes in three-, six-, and twelve-month T-bill rates is estimated over the late 1950s through the end of 1999. The empirical results indicate that the volatility of daily changes in short rates obtained from the fat-tailed generalized error distribution is almost the same as the volatility of the extremes obtained from the generalized Pareto distribution.

Download or read book Term Structure of Interest Rates Yield Curve Residuals and the Consistent Pricing of Interest Rate Derivatives written by Massoud Heidari and published by . This book was released on 2005 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: Dynamic term structure models price interest rate options based on the model-implied fair values of the yield curve, ignoring any pricing residuals on the yield curve that are either from model approximations or market imperfections. In contrast, option pricing in practice often takes the market observed yield curve as given and focuses exclusively on the specification of the volatility structure of forward rates. Thus, if any errors exist on the observed yield curve, they will be carried over permanently. In this paper, we propose an m+n model structure that bridges the gap between the two approaches and consistently prices both interest rates and interest rate options. The first m factors capture the systematic movement of the yield curve, whereas the latter n factors capture the impacts of the yield curve residuals on option pricing. We estimate a 3+3 Gaussian affine example using eight years of data on U.S. dollar LIBOR, swap rates, and interest rate caps. The model performs well in pricing both interest rates and interest rate caps. Furthermore, estimation shows that small residuals on the yield curve can have large impacts on pricing interest rate caps. Under the estimated model, the three yield curve factors explain over 99 percent of the variation on the yield curve, but account for less than 50 percent of the variation on cap implied volatilities. Incorporating the three residual factors improves the explained variance on cap implied volatility to over 99 percent.

Download or read book Essays on the Volatility of the Term Structure of Interest Rates written by Miguel A. Ferreira and published by . This book was released on 2000 with total page 204 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Estimation and Tests of the Term Structure of Interest Rates written by H. Joe Wells and published by . This book was released on 1978 with total page 294 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book International Convergence of Capital Measurement and Capital Standards written by and published by Lulu.com. This book was released on 2004 with total page 294 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Recent Advances in Estimating Term Structure Models written by David A. Chapman and published by . This book was released on 2002 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: In the past 10 years, increasingly sophisticated statistical techniques have been applied to the estimation of increasingly complex models of the term structure of interest rates. In reviewing this literature, we highlight the facts that have been established and the key unresolved issues. The data indicate that within a wide range of interest rates, mean reversion in rates is, at best, weak. Whether mean reversion is stronger for very high or very low levels of rates is an unresolved issue. The absolute volatility of rates increases as the level of rates increases, but the strength of this effect and the role and nature of either stochastic-volatility or regime-switching components in rates are still unclear. Unfortunately, these unresolved issues have important implications for fixed-income option pricing and risk measurement, including value-at-risk calculations.

Download or read book Endogenous Term Premia and Anomalies in the Term Structure of Interest Rates written by William Roberds and published by . This book was released on 1996 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Estimating the Term Structure of Interest Rates from Data that Include the Prices of Coupon Bonds written by Thomas Sedgwick Coleman and published by . This book was released on 1992 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The controlling of interest rate risk in banks written by Tatiana Pouzikova and published by diplom.de. This book was released on 2000-08-07 with total page 58 pages. Available in PDF, EPUB and Kindle. Book excerpt: Inhaltsangabe:Einleitung: Die vorliegende Arbeit widmet sich dem Controlling des Zinsänderungsrisikos in Banken mit Hilfe des VaR-Konzeptes. Zinsänderungen wirken sich in Form des Margen-Risikos, des Reinvestment-Risikos und des Marktwertrisikos aus. Als Instrument zur Risikomessung und -steuerung in Banken wird seit Beginn der 90er Jahre der Value-at-Risk (VaR) propagiert. Der beeindruckende Vorteil des VaR-Konzeptes liegt darin, daß es einen monetären Maßstab bereitstellt, mit dem verschiedenartige Risiken zusammengeführt und vergleichbar gemacht werden. Die gängigen VaR-Modelle werden in dieser Arbeit kurz präsentiert und ihre Annahmen erläutert. Weiterhin werden die Annahmen auf ihre Gültigkeit bei der Modellierung von Zinsänderungsrisiken geprüft. Man möchte nicht nur wissen, ob diese Annahmen erfüllt sind, man möchte auch die Aussagefähigkeit von VaR auf etablierten Märkten und Emerging Markets vergleichen. Um die Performance der VaR-Methoden zu beurteilen, wird in dieser Arbeit ein Backtesting von drei Methoden - Historische Simulation, Monte Carlo Simulation und Methode der Extremwerttheorie - für zwei repräsentative Portfolios durchgeführt. Das erste Portfolio bestand aus einer DM-Bundesanleihe mit 5-jähriger Laufzeit, das zweite war ein Indexportfolio auf der Basis von JP Morgans Emerging Market Bond Index Plus für Rußland. Dabei zeigen sich deutliche Performance-Unterschiede: Während das Zinsänderungsrisiko der deutschen Anleihe relativ gut durch den VaR abgebildet wurde, erwiesen sich alle drei Methoden als unbrauchbar für den russischen Markt. Um die Ursachen für die Performance-Unterschiede auf beiden Märkten aufzuzeigen, werden die Verteilungseigenschaften beider Zeitreihen analysiert. Inhaltsverzeichnis:Table of Contents: 1.Introduction4 2.Identification of risk5 2.1Definition of interest rate risk5 2.2Components of a bank's interest rate exposure6 2.3Determinants of the term structure of interest rates12 3.Application of VaR for measurement of interest rate risk12 3.1VaR-definition13 3.2Methods of VaR- calculation15 3.3Consequences of underlying assumptions for risk estimation17 3.3.1Assumption of normal distribution17 3.3.2 Future like past assumption18 4.Specific problems of the interest rate risk estimation with VaR20 4.1Convexity20 4.2Reduced time to maturity and riding-the-yield-curve-effect22 4.3Compound effects of interest rate, exchange rate and credit risks23 4.4Further problems23 5.Empirical [...]

Download or read book Long Run Risks in the Term Structure of Interest Rates written by Taeyoung Doh and published by . This book was released on 2013 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: Using Bayesian methods, this paper estimates a model in which persistent fluctuations in expected consumption growth, expected inflation, and their timevarying volatility determine asset price variation. The analysis of the U.S. nominal term structure data from 1953 to 2006 shows that i) agents dislike high uncertainty and demand compensation for volatility risks, ii) the time variation of the term premium is driven by the compensation for fluctuating inflation volatility, and iii) estimates of risk factors are broadly consistent with survey data evidence.

Download or read book Empirical Dynamic Asset Pricing written by Kenneth J. Singleton and published by Princeton University Press. This book was released on 2009-12-13 with total page 497 pages. Available in PDF, EPUB and Kindle. Book excerpt: Written by one of the leading experts in the field, this book focuses on the interplay between model specification, data collection, and econometric testing of dynamic asset pricing models. The first several chapters provide an in-depth treatment of the econometric methods used in analyzing financial time-series models. The remainder explores the goodness-of-fit of preference-based and no-arbitrage models of equity returns and the term structure of interest rates; equity and fixed-income derivatives prices; and the prices of defaultable securities. Singleton addresses the restrictions on the joint distributions of asset returns and other economic variables implied by dynamic asset pricing models, as well as the interplay between model formulation and the choice of econometric estimation strategy. For each pricing problem, he provides a comprehensive overview of the empirical evidence on goodness-of-fit, with tables and graphs that facilitate critical assessment of the current state of the relevant literatures. As an added feature, Singleton includes throughout the book interesting tidbits of new research. These range from empirical results (not reported elsewhere, or updated from Singleton's previous papers) to new observations about model specification and new econometric methods for testing models. Clear and comprehensive, the book will appeal to researchers at financial institutions as well as advanced students of economics and finance, mathematics, and science.

Download or read book Modelling and forecasting stock return volatility and the term structure of interest rates written by Michiel de Pooter and published by Rozenberg Publishers. This book was released on 2007 with total page 286 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation consists of a collection of studies on two areas in quantitative finance: asset return volatility and the term structure of interest rates. The first part of this dissertation offers contributions to the literature on how to test for sudden changes in unconditional volatility, on modelling realized volatility and on the choice of optimal sampling frequencies for intraday returns. The emphasis in the second part of this dissertation is on the term structure of interest rates.

Download or read book Long Memory Models of Interest Rates the Term Structure and Variance Bounds Tests written by Gary S. Shea and published by . This book was released on 1985 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Fixed Income Securities written by Lionel Martellini and published by John Wiley & Sons. This book was released on 2005-09-27 with total page 662 pages. Available in PDF, EPUB and Kindle. Book excerpt: This textbook will be designed for fixed-income securities courses taught on MSc Finance and MBA courses. There is currently no suitable text that offers a 'Hull-type' book for the fixed income student market. This book aims to fill this need. The book will contain numerous worked examples, excel spreadsheets, with a building block approach throughout. A key feature of the book will be coverage of both traditional and alternative investment strategies in the fixed-income market, for example, the book will cover the modern strategies used by fixed-income hedge funds. The text will be supported by a set of PowerPoint slides for use by the lecturer First textbook designed for students written on fixed-income securities - a growing market Contains numerous worked examples throughout Includes coverage of important topics often omitted in other books i.e. deriving the zero yield curve, deriving credit spreads, hedging and also covers interest rate and credit derivatives

Download or read book Estimating the Term Structure of Volatility in Futures Yield written by Ram Bhar and published by . This book was released on 1995 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Term Structure of Interest Rate Volatility written by Eugene Chow and published by . This book was released on with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Unspanned Stochastic Volatility Term Structure Model Applied in Negative Interest Rate Environment written by Jan Sedlak and published by . This book was released on 2016 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt: The interest rate transition from the positive environment, into the negative territory questions the consensus of interest rates and opens up a wide field of unresearched areas. To cope with the changing interest rate environment as well as satisfying regulatory criteria, a model following the Heath-Jarrow-Morton framework with Unspanned Stochastic Volatility is implemented. The model is constructed to match shocks to the level, slope and curvature of the term structure. Estimation is performed with Libor rates, Government rates and Swaption ATM normal implied volatilities from 2006-01-01 to 2015-03-12. The model is backtested both in sample and out of sample and compared to a Normal model and a Log Normal model. The model shows a good quantile fit to the medium and long end of the term structure and performs relatively better then the two challenger models.