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A learning hypothesis of the term structure of interest rates

Romhányi, Balázs - EconWPA - 2005

Recent empirical results about the US term structure are difficult to reconcile with the classical hypothesis of rational expectations even if time-varying but stationary term premia are allowed for. A hypothesis of rational learning about the conditional variance of the log pricing kernel is...

Persistent link: https://www.econbiz.de/10005412568

Heterogeneous Time Preferences and Interest Rates - The Preferred Habitat Theory Revisited

Riedel, Frank - EconWPA - 1999

Habitat Theory of Modigliani and Sutch, a model for intertemporal preferences accounting for preferred habitats is proposed … term bonds to shorter instruments as the Preferred Habitat Theory predicts. …

Persistent link: https://www.econbiz.de/10005413212

Dynamic Risk Profile of the US Term Structure by Wavelet MRA

JAMDEE, SUTTHISIT; LOS, CORNELIS A. - EconWPA - 2004

maturity has its own uniqueness and accordingly supports the Market Segmentation theory. The findings also imply that affine …

Persistent link: https://www.econbiz.de/10005125063

Term Structure of Interest Rates, Yield Curve Residuals, and the Consistent Pricing of Interest Rates and Interest Rate Derivatives

Heidari, Massoud; Wu, Liuren - EconWPA - 2002

Dynamic term structure models (DTSMs) price interest rate derivatives 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...

Persistent link: https://www.econbiz.de/10005134665

Estimating the Volatility Structure of an Arbitrage-Free Interest Rate Model Via the Futures Markets

Bhar, Ram; Chiarella, Carl; To, Thuy-Duong - EconWPA - 2004

This paper considers a class of Heath-Jarrow-Morton (1992) term structure models, characterized by time deterministic volatilities for the instantaneous forward rate. The bias that arises from using observed futures yields as a proxy for the unobserved instantaneous forward rate is analyzed. The...

Persistent link: https://www.econbiz.de/10005413218

Squeezing the Interest Rate Smoothing Weight with a Hybrid Expectations Model

Castelnuovo, Efrem - EconWPA - 2002

Successful descriptions of the short-term nominal interest rate inertial behavior have frequently been obtained with small scale macro models in which a Central Banker minimizes a loss function containing an argument labelled as interest rate smoothing. The rationale for this argument is not...

Persistent link: https://www.econbiz.de/10005076824

Adaptive Learning and Cyclical Behavior of Output and Inflation

Adam, Klaus - EconWPA - 2002

This paper considers a sticky price model with a cash-in-advance constraint where agents forecast inflation rates with … consistent with rational expectations once learning is complete. When past performance governs the choice of forecast model …, agents may prefer to use the inconsistent forecast model, which generates an equilibrium where forecasts are inefficient …

Persistent link: https://www.econbiz.de/10005126229

Stabilisations, Crises and the "Exit" Problem - A Theoretical Model

Bleaney, Michael; Gundermann, Marco - EconWPA - 2002

Exchange-rate-based stabilisations, even if successful, usually lack credibility initially. This is reflected in high (ex post) real interest rates and some degree of real exchange rate appreciation. Empirical observation suggests that wage inflation declines smoothly over time whilst interest...

Persistent link: https://www.econbiz.de/10005126376

Firm's R&D Behavior Under Rational Expectations

Raut, Lakshmi K. - EconWPA - 1997

This paper formulates dynamic R\&D investment decisions of private firms as an optimal stochastic control problem. It derives explicitly R\&D investment decision rule and the cross equations parameter restrictions imposed by the rational expectations hypothesis, using the Riccati equations only...

Persistent link: https://www.econbiz.de/10005062400

Causal Relationships Between Premiums and Losses, and Causes of the Underwriting Cycles

Chung, Ronald K.; Fung, Hung-Gay; Lai, Gene C.; Witt, … - EconWPA - 1994

This research explored two major insurance-market issues. First, it investigated the dynamic interactions between premiums and losses using vector autoregressive (VAR) models. Second, it showed how premiums respond to shocks to losses, surplus, interest rates, the variance in losses, and the...

Persistent link: https://www.econbiz.de/10005412562

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