Download or read book Regime Shifts in Short Term Riskless Interest Rates written by Walter N. Torous and published by . This book was released on 2012 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Chan, Karolyi, Longstaff, and Sanders [1992] find no evidence that the October 1979 change in Federal Reserve operating policy resulted in a once-and-for-all deterministic break in the behavior of short term riskless interest rates. In contrast, we provide evidence of such a regime shift even after allowing the volatility of interest rate changes to depend on the level of interest rates. However, rather than modeling this regime shift as a permanent event with no further shifts possible, it is more realistic to model the change in regimes itself as a random variable. Accordingly, we put forward a stochastic volatility interest rate model which generalizes previous specifications of interest rate dynamics and allows testing for stochastic regime shifts. This Markov regime shifting model provides a more accurate description of the behavior of U.S. short term riskless interest rates. We also consider a specification that allows interest rate volatility to follow a diffusion process and we provide a statistically efficient integration-based filtering procedure to estimate its parameters. Given U.S. short term riskless interest rate data, we cannot statistically distinguish between these alternative models. In either case, once the stochastic nature of interest rate volatility is taken into account, we find little or no evidence of a deterministic structural break in corresponding stochastic volatility interest rate dynamics around October 1979.
Download or read book Regime Shifts in Short Term Riskless Interest Rates written by Clifford A. Ball 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 Short Rate Dynamics and Regime Shifts written by Yuewu Xu and published by . This book was released on 2002 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: We characterize the dynamics of the U.S. short-term interest rate using a Markov regime switching model. Using a test developed by Garcia (1998), we show that there are two regimes in the data: In one regime, the short rate behaves like a random walk with low volatility; in another regime, it exhibits strong mean reversion and high volatility. In our model, the sensitivity of interest rate volatility to the level of interest rate is much lower than what is commonly found in the literature. We also show that the findings of nonlinear drift in Ait-Sahalia (1996b) and Stanton (1997), using nonparametric methods, are consistent with our regime switching model.
Download or read book Volatility and Time Series Econometrics written by Mark Watson and published by Oxford University Press. This book was released on 2010-02-11 with total page 432 pages. Available in PDF, EPUB and Kindle. Book excerpt: A volume that celebrates and develops the work of Nobel Laureate Robert Engle, it includes original contributions from some of the world's leading econometricians that further Engle's work in time series economics
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 The Role of Asymmetries and Regime Shifts in the Term Structure of Interest Rates written by and published by . This book was released on 2005 with total page 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 Modelling Yields at the Lower Bound Through Regime Shift written by Peter Hördahl and published by . This book was released on 2019 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt: "The authors propose a regime-switching approach to deal with the lower bound on nominal interest rates in dynamic term structure modelling. In the "lower bound regime", the short term rate is expected to remain constant at levels close to the effective lower bound; in the "normal regime", the short rate interacts with other economic variables in a standard way. State-dependent regime switching probabilities ensure that the likelihood of being in the lower bound regime increases as short rates fall closer to zero. A key advantage of this approach is to capture the gradualism of the monetary policy normalization process following a lower bound episode. The possibility to return to the lower bound regime continues exerting an influence in the early phases of normalization, pulling expected future rates downwards. They apply our model to U.S. data and show that it captures key properties of yields at the lower bound. In spite of its heavier parameterization, the regime-switching model displays a competitive out-of-sample forecasting performance. It can also be used to gauge the risk of a return to the lower bound regime in the future. As of mid-2018, it provides a more benign assessment than alternative measures."--Abstract.
Download or read book Monetary Policy Regime Shifts and the Unusual Behavior of Real Interest Rates written by John Huizinga and published by . This book was released on 1985 with total page 35 pages. Available in PDF, EPUB and Kindle. Book excerpt: A striking phenomenon of the early 1980s is the climb in real interest rates to levels unprecedented in the post-World War II period. In order to understand this phenomenon, this paper investigates the nature and timing of shifts in the real rate process to determine if the recent unusual behavior of real rates is associated with monetary policy regime changes. We find that not only are there significant shifts in the stochastic process of real interest rates in October 1979 and October 1982 when the Federal Reserve alters its behavior, but these dates are also found to be the most likely breakpoints in the real rate process. When we analyze another monetary policy regime change with many similarities to that of October 1979, the sharp rises in the discount rate in 1920, we also reach a similar conclusion; there is a striking correspondence between the monetary policy regime change and the shift in the real rate process. Other studies have examined competing explanations for the recent unusual behavior of real interest rates -- e.g.budget deficits or favorable changes in business taxation. Although these competing explanations have met with mixed success, our evidence lends substantial support to the view that monetary policy regime changes have been and continue to be an important source of shifts in the behavior of real interest rates
Download or read book Essentials of Time Series for Financial Applications written by Massimo Guidolin and published by Academic Press. This book was released on 2018-05-29 with total page 435 pages. Available in PDF, EPUB and Kindle. Book excerpt: Essentials of Time Series for Financial Applications serves as an agile reference for upper level students and practitioners who desire a formal, easy-to-follow introduction to the most important time series methods applied in financial applications (pricing, asset management, quant strategies, and risk management). Real-life data and examples developed with EViews illustrate the links between the formal apparatus and the applications. The examples either directly exploit the tools that EViews makes available or use programs that by employing EViews implement specific topics or techniques. The book balances a formal framework with as few proofs as possible against many examples that support its central ideas. Boxes are used throughout to remind readers of technical aspects and definitions and to present examples in a compact fashion, with full details (workout files) available in an on-line appendix. The more advanced chapters provide discussion sections that refer to more advanced textbooks or detailed proofs. Provides practical, hands-on examples in time-series econometrics Presents a more application-oriented, less technical book on financial econometrics Offers rigorous coverage, including technical aspects and references for the proofs, despite being an introduction Features examples worked out in EViews (9 or higher)
Download or read book Interest Rates Contagion and Capital Controls written by Sebastian Edwards and published by . This book was released on 2000 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper I analyze several issues related to contagion, ' including its definition, recent experiences, alternative channels at work, and possible prevention mechanisms. The discussion deals with the macroeconomics implications of contagion, and concentrates on the relationship between the degree of openness of the capital account and the transmission of foreign shocks. More specifically, I ask whether restrictions to capital mobility and, in particular, controls on capital inflows of the type Chile implemented throughout most of the 1990s reduce a country's vulnerability to contagion. I also deal, albeit briefly, with the connection between the exchange rate regime and the propagation of international shocks. The evidence presented in this paper shows that the effectiveness of Chile's controls on inflows has often been overstated. Indeed, Chile was severely affected by the East Asian, Russian and Brazilian crises.
Download or read book Interest Rate Volatility and Contagion in Emerging Markets written by Sebastian Edwards and published by . This book was released on 2000 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper we use high frequency interest rate data for a group of Latin American countries to analyze the behavior of volatility through time. We are particularly interested in understanding whether periods of high volatility spillover across countries. Our analysis relies both on univariate and bivariate switching volatility models. Our results indicate that high-volatility episodes are, in general, short-lived, lasting from two to seven weeks. We find some weak evidence of volatility co-movements across countries. Overall, our results are not overly supportive of contagion' stories.
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 Three Essays on Financial Markets and the Macroeconomy written by Shingo Goto and published by . This book was released on 2001 with total page 506 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Working Paper Series written by and published by . This book was released on 2002 with total page 532 pages. Available in PDF, EPUB and Kindle. Book excerpt:
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 Hidden Markov Models in Finance written by Rogemar S. Mamon and published by Springer. This book was released on 2014-05-14 with total page 280 pages. Available in PDF, EPUB and Kindle. Book excerpt: Since the groundbreaking research of Harry Markowitz into the application of operations research to the optimization of investment portfolios, finance has been one of the most important areas of application of operations research. The use of hidden Markov models (HMMs) has become one of the hottest areas of research for such applications to finance. This handbook offers systemic applications of different methodologies that have been used for decision making solutions to the financial problems of global markets. As the follow-up to the authors’ Hidden Markov Models in Finance (2007), this offers the latest research developments and applications of HMMs to finance and other related fields. Amongst the fields of quantitative finance and actuarial science that will be covered are: interest rate theory, fixed-income instruments, currency market, annuity and insurance policies with option-embedded features, investment strategies, commodity markets, energy, high-frequency trading, credit risk, numerical algorithms, financial econometrics and operational risk. Hidden Markov Models in Finance: Further Developments and Applications, Volume II presents recent applications and case studies in finance and showcases the formulation of emerging potential applications of new research over the book’s 11 chapters. This will benefit not only researchers in financial modeling, but also others in fields such as engineering, the physical sciences and social sciences. Ultimately the handbook should prove to be a valuable resource to dynamic researchers interested in taking full advantage of the power and versatility of HMMs in accurately and efficiently capturing many of the processes in the financial market.
