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The Term Structure of Interest Rates and Future Inflation
Kotlán, Viktor - EconWPA - 2000
Expected inflation is a major decision factor of various economic agents. Since expected inflation is not directly … observable, economists have been seeking ways of extracting market’s inflation expectations from observable variables. One of the … most reliable sources of inflation expectations is the term structure of interest rates. This paper presents the …
Persistent link: https://www.econbiz.de/10005412621
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Modeling Credit Risk by Affine Processes
Chen, Li; Filipovic, Damir - EconWPA - 2003
In this paper, the treasury rates and the credit migrations are jointly modeled by multi-dimensional affine processes. In order to capture the entire information, including credit migrations and default events, we construct non-conservative regular affine processes to model credit migrations and...
Persistent link: https://www.econbiz.de/10005413230
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A Simple Model for Credit Migration and Spread Curves
Chen, Li; Filipovic, Damir - EconWPA - 2003
We propose and examine a simple model for credit migration and spread curves of a single firm both under the real-world and the risk-neutral measure. This model is a hybrid of a structural and a reduced-form model. Default is triggered either by successive downgradings of the firm or an...
Persistent link: https://www.econbiz.de/10005561740
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Equity Returns and Inflation: The Puzzlingly Long Lags
Lothian, James R.; McCarthy, Cornelia H.. - EconWPA - 2001
equities fail the test as inflation hedges, as had been quite widely believed, but that they take so long to pass. …
Persistent link: https://www.econbiz.de/10005124935
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REINSURANCE, TAXES AND EFFICIENCY: A CONTINGENT CLAIMS MODEL OF INSURANCE MARKET EQUILIBRIUM
GARVEN, James R.; Louberge, Henri - EconWPA - 1994
This paper presents an analytical model of underwriting capacity and insurance market equilibrium under an asymmetric corporate tax schedule. It is shown that reinsurance markets enable risk-neutral insurers to allocate tax shields to those firms that have the greatest capacity for utilizing...
Persistent link: https://www.econbiz.de/10005413066
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Dynamic Risk Profile of the US Term Structure by Wavelet MRA
JAMDEE, SUTTHISIT; LOS, CORNELIS A. - EconWPA - 2004
A careful examination of interest rate time series from different U.S. Treasury maturities by Wavelet Multiresolution Analysis (MRA) suggests that the first differences of the term structure of interest rate series are periodic or, at least, cyclic, non-stationary, long-term dependent, in...
Persistent link: https://www.econbiz.de/10005125063
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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
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Are Interest Rate Derivatives Spanned by the Term Structure of Interest Rates?
Heidari, Massoud; WU, Liuren - EconWPA - 2002
We investigate whether the same finite dimensional dynamic system spans both interest rates (the yield curve) and interest rate options (the implied volatility surface). We find that the options market exhibits factors independent of the underlying yield curve. While three common factors are...
Persistent link: https://www.econbiz.de/10005134877
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Phenomenology of the interest curve
BOUCHAUD, Jean-Philippe; CONT, Rama; KAROUI, Nicole EL; … - EconWPA - 1997
This paper contains a statistical description of the whole U.S. forward rate curve (FRC), based on data from the period 1990-1996. We find that the average deviation of the FRC from the spot rate grows as the square- root of the maturity, with a proportionality constant which is comparable to...
Persistent link: https://www.econbiz.de/10005413172
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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