Download or read book Term Structure Models of Interest Rates with Jump diffusion Information written by Koji Kusuda and published by . This book was released on 2003 with total page 328 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Linear Quadratic Term Structure Models Toward the Understanding of Jumps in Interest Rates written by George J. Jiang and published by . This book was released on 2012 with total page 13 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper, we propose a unifying class of affine-quadratic term structure models (AQTSMs) in the general jump-diffusion framework. Extending existing term structure models, the AQTSMs incorporate random jumps of stochastic intensity in the short rate process. Using information from the Treasury futures market, we propose a GMM approach for the estimation of the risk-neutral process. A distinguishing feature of the approach is that the time series estimates of stochastic volatility and jump intensity are obtained, together with model parameter estimates. Our empirical results suggest that stochastic jump intensity significantly improves the model fit to the term structure dynamics. We identify a stochastic jump intensity process that is negatively correlated with interest rate changes. Overall, negative jumps tend to have a larger size than positive ones. Our empirical results also suggest that, at monthly frequency, while stochastic volatility has certain predictive power of inflation, jumps are neither triggered by nor predictive of changes in macroeconomic variables. At daily frequency, however, we document interesting patterns for jumps associated with informational shocks in the financial market.

Download or read book Modeling the Term Structure of Interest Rates written by Rajna Gibson and published by Now Publishers Inc. This book was released on 2010 with total page 171 pages. Available in PDF, EPUB and Kindle. Book excerpt: Modeling the Term Structure of Interest Rates provides a comprehensive review of the continuous-time modeling techniques of the term structure applicable to value and hedge default-free bonds and other interest rate derivatives.

Download or read book Jump diffusion Processes and the Term Structure of Interest Rates written by Chang Mo Ahn and published by . This book was released on 1986 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Jump Diffusion Processes and the Bond Markets written by Sanjiv Ranjan Das and published by . This book was released on 2009 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper develops models of the term structure when the short rate follows a jump-diffusion process. An empirical implementation demonstrates that jump-diffusions better explain interest rate behavior than pure diffusion models. The fit is shown to be improved by an augmented jump-diffusion time varying volatility model proposed here. The effect of skewness and kurtosis on the term structure of interest rates is analyzed. The economic implications of jump activity are explored with the analysis of changes in Federal Reserve target rates and their relationship to the term structure.

Download or read book Jump diffusion Term Structure and Ito Conditional Moment Generator written by Hao Zhou and published by . This book was released on 2001 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt:

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 Jump diffusion Processes and Affine Term Structure Models written by J. Benson Durham and published by . This book was released on 2005 with total page 84 pages. Available in PDF, EPUB and Kindle. Book excerpt: Affine term structure models in which the short rate follows a jump-diffusion process are difficult to solve, and the parameters of such models are hard to estimate. Without analytical answers to the partial difference differential equation (PDDE) for bond prices implied by jump-diffusion processes, one must find a numerical solution to the PDDE or exactly solve an approximate PDDE. Although the literature focuses on a single linearization technique to estimate the PDDE, this paper outlines alternative methods that seem to improve accuracy. Also, closed-form solutions, numerical estimates, and closed-form approximations of the PDDE each ultimately depend on the presumed distribution of jump sizes, and this paper explores a broader set of possible densities that may be more consistent with intuition, including a bi-modal Gaussian mixture. GMM and MLE of one- and two-factor jump-diffusion models produce some evidence for jumps, but sensitivity analyses suggest sizeable confidence intervals around the parameters.

Download or read book A Nonparametric View of the Role of Jumps to Interest Rates written by Michael S. Johannes and published by . This book was released on 2011 with total page 55 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper provides an empirical analysis of the role of jumps in continuous-time models of the short rate. A diagnostic is developed to relate the failure of single and certain multi-factor models to the presence of unaccounted for jump-type movements. I introduce a nonparametric jump-diffusion model and develop an estimation methodology, which is justified using Monte Carlo simulations. The results point toward a dominant role for jumps in determining the dynamics of the short rate relative to standard diffusion components. An approximate filtering algorithm estimates jump times and sizes, providing further insight into the role of jumps. Jumps appear to be a mechanism through which fundamental information regarding the state of the macroeconomy enters the term-structure. Last, I investigate the implications of jumps for the default free, zero coupon term structure of interest rates.

Download or read book Affine Quadratic Jump Diffusion Term Structure Models written by George J. Jiang and published by . This book was released on 2013 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper, we propose a unifying affine-quadratic jump-diffusion framework for the term structure dynamics. The model incorporates both stochastic volatility and random jumps in the short rate process. In particular, we extend the existing models by explicitly modeling the jump intensity as a stochastic process. Using information from the treasury futures market, a GMM estimation approach is proposed for the risk-neutral process. A distinguishing feature of the approach is that the latent state variables are obtained, together with the model parameter estimates. The estimated latent state variables, namely the stochastic volatility and stochastic jump intensity, allow us to investigate the premia of various risk factors as well as underlying economic variables driving the term structure dynamics. Our empirical results suggest that the stochastic jump intensity significantly improves the model fit to the term structure dynamics. We identify a jump intensity negatively correlated with interest rate changes, a higher probability of positive jump than negative jump, and an on average larger size of negative jump than positive jump. We document a significant time-varying risk premium that is positively correlated with volatility.

Download or read book On the Term Structure of Interbank Interest Rates written by Manuel Moreno and published by . This book was released on 1998 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper we study the dynamic behavior of the term structure of Interbank interest rates and the pricing of options on interest rate sensitive securities. We posit a generalized single factor model with jumps to take into account external influences in the market. Daily data is used to test for jump effects. Qualitative examination of the linkage between Monetary Authorities interventions and jumps are studied. Pricing results suggests a systematic underpricing in bonds and call options if the jump component is not included. However, the pricing of put options on bonds presents indeterminacies.

Download or read book Pricing Interest Rate Derivatives with Arbitrary Skewness and Kurtosis written by Sanjiv R. Das and published by . This book was released on 1995 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt: Term structure models employing jump-diffusion processes may be used to accommodate the observed skewness and kurtosis of interest rates. This paper extends the discrete-time, pure-diffusion version of the Heath-Jarrow-Morton model to the pricing of American bond options when the underlying term structure of interest rates follows a jump-diffusion process. The jump-diffusion process is specified using a hexanomial tree (six nodes emanating from each node), and the tree is shown to be recombining. This feature of the tree ensures path-independence. The scheme is parsimonious, accurate and convergent. A fairly general class of time-dependent volatilities preserving path independence and providing mean revision is shown to be attainable even under this enhanced jump-diffusion framework.

Download or read book Analytical Approximations of the Term Structure for Jump diffusion Processes written by Jamil Baz and published by . This book was released on 1995 with total page 21 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper obtains a solution to a jump-extended Vasicek (1977) model of interest rates by using an appropriation linearization of the fundamental partial differential-difference equation (PDDE) for the price of a zero-coupon bond. This solution is benchmarked against the numerical solution to the exact PDDE and is found to be extremely accurate over a range of plausible parameter values. While an exact solution to the extended Vasicek model is not possible for Gaussian jumps nor for constant jump sizes, the accuracy of the solution bodes well for the future ability to build jump-diffusion models for bond pricing when jumps may be allowed to follow a wide variety of distributions.

Download or read book Jump diffusion Processes and the Bond Markets written by Sanjiv R. Das and published by . This book was released on 1994 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper develops models of the term structure when the short rate follows a jump-diffusion process. An empirical implementation demonstrates that jump-diffusions better explain interest rate behavior than pure diffusion models. The fit is shown to be improved by an augmented jump-diffusion time varying volatility model proposed here. The effect of skewness and kurtosis on the jump activity are explored with an analysis of changes in Federal Reserve target rates and their relationship to the term structure.

Download or read book On the Term Structure of Interbank Interest Rates Jump diffusion Processes and Option Pricing written by Manuel Moreno and published by . This book was released on 1995 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Pricing Interest Rate Derivatives with Arbitrary Skewness and Kurtosis written by Sanjiv R. Das and published by . This book was released on 1995 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt: Term structure models employing jump-diffusion processes may be used to accommodate the observed skewness and kurtosis of interest rates. This paper extends the discrete-time, pure-diffusion version of the Heath-Jarrow-Morton model to the pricing of American bond options when the underlying term structure of interest rates follows a jump-diffusion process. The jump-diffusion process is specified using a hexanomial tree (six nodes emanating from each node), and the tree is shown to be recombining. This feature of the tree ensures path-independence. The scheme is parsimonious, accurate and convergent. A fairly general class of time-dependent volatilities preserving path independence and providing mean revision is shown to be attainable even under this enhanced jump-diffusion framework.

Download or read book The Term Structure and Interest Rate Contingent Claims with Jump Diffusion and Stochastic Volatility written by Venkat Gangadharan and published by . This book was released on 1996 with total page 242 pages. Available in PDF, EPUB and Kindle. Book excerpt: