This paper reexamines the issue of unspanned stochastic volatility (USV) in bond markets and the puzzle of poor … relative pricing between bonds and bond options. I make a distinction between the "weak USV" and the "strong USV" scenarios …-Gaussian model (a non-USV model) estimated without bond options data can capture much of the movement in bond option prices. Dropping …

, our credit and illiquidity proxies can explain almost three quarters of the yield spread-bond volatility relation with …We document a strong positive cross-sectional relation between corporate bond yield spreads and bond return … volatilities. As corporate bond prices are generally attributable to both credit risk and illiquidity as discussed in Huang and …

We analyze the term structure of illiquidity premiums as the difference between the yield curves of two major bond …

This study examines the joint evolution of risk-neutral stock index and bond yield volatilities by using the Chicago … Board Option Exchange S&P500 volatility index (VIX) and the Bank of America Merrill Lynch Treasury Option Volatility … spurious extreme persistence and incomplete inferences about asymmetric volatility. The findings carry important implications …

Riksbank and the European Central Bank (ECB) on bond risk premia in the Swedish government bond market. Using a novel arbitrage …-free dynamic term structure model of nominal and real bond prices that accounts for bondspecific safety premia, we find that … Sveriges Riksbank's bond purchases raised inflation and short-rate expectations, lowered nominal and real term premia and …

I study the relationship between interest rates and interest-rate volatility, particularly the idea of unspanned … stochastic volatility (USV): volatility risk that cannot be hedged with bonds or swaps. Simulated data is used to assess the … backing, I consider data from several modern interest-rate markets, and find volatility to be largely, and often fully …

volatility specifications and/or jumps.In the yield curve literature it is widely accepted that one-factor is not sufficient to …-factor stochastic volatility specification within the structural model of credit risk. One of the factors determines the correlation …-term returns and variance. The numerical tests reveal how the introduction of two volatility factors can generate a wide range of …

We introduce a tractable multi-currency model with stochastic volatility and correlated stochastic interest rates that … of the implied volatility surfaces of a triangle of FX rates shows the flexibility of our framework in dealing with the …

well as many patterns of the term-structures of real and nominal bond yields. The model is robust to many properties of …

We examine term structure theories by using a novel approach. We form bond investment strategies based on different … indeed form the basis of a successful bond strategy that outperforms an unbiased expectation inspired passive bond buy and … if one uses information from the forward curve or the term structure as a guide to adjusting bond portfolios in response …