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Stochastic Correlation and Risk Premia in Term Structure Models

Chiarella, Carl; Hsiao, Chih-Ying; To, Thuy-Duong - Finance Discipline Group, Business School - 2011

This paper proposes and analyses a term structure model that allows for both stochastic correlation between underlying factors and an extended market price of risk specification. The issues of invariant transformation and different normalization are then considered so that a comparison between...

Persistent link: https://www.econbiz.de/10009493154

A Maximum Likelihood Approach to Estimation of Heath-Jarrow-Morton Models

Bhar, Ram; Chiarella, Carl; To, Thuy Duong - Finance Discipline Group, Business School - 2002

Research on the Heath-Jarrow-Morton (1992) term structure models so far has focused on the class having time-deterministic instantaneous forward rate volatility. In this case the forward rate is Markovian, even if the spot rate process is not. However, this Markovian feature can only be used...

Persistent link: https://www.econbiz.de/10004984491

The Volatility Structure of the Fixed Income Market under the HJM Framework: A Nonlinear Filtering Approach

Chiarella, Carl; To, Thuy-Duong - Finance Discipline Group, Business School - 2005

This paper seeks to estimate a multifactor volatility model so as to describe the dynamics of interest rate markets, using data from the highly liquid but short term futures markets. The difficult problem of estimating such multifactor models is resolved by using a genetic algorithm to carry out...

Persistent link: https://www.econbiz.de/10004984533

The Volatility Structure of the Fixed Income Market under the HJM Framework: A Nonlinear Filtering Approach

Chiarella, Carl; Hung, Hing; To, Thuy-Duong - Finance Discipline Group, Business School - 2005

This paper considers the dynamics for interest rate processes within a multi-factor Heath, Jarrow and Morton (1992) specification. Despite the flexibility of and the notable advances in theoretical research about the HJM models, the number of empirical studies is still inadequate. This paucity...

Persistent link: https://www.econbiz.de/10004984569

Inferential Expectations

Menzies, Gordon; Zizzo, Daniel John - Finance Discipline Group, Business School - 2005

We propose that the formation of beliefs be treated as statistical hypothesis tests, and we label such beliefs inferential expectations. If a belief is overturned through the build-up of evidence, agents are assumed to switch to the rational expectation. Rational expectations are shown to be a...

Persistent link: https://www.econbiz.de/10005041724

Three-Benchmarked Risk Minimization for Jump Diffusion Markets

Du, Ke; Platen, Eckhard - Finance Discipline Group, Business School - 2011

The paper discusses the problem of hedging not perfectly replicable contingent claims by using a benchmark, the … benchmarked profit and loss is only driven by nontraded uncertainty and forms a martingale that starts at zero. Benchmarked profit … pricing and hedging for an increasing number of not fully replicable benchmarked contingent claims. …

Persistent link: https://www.econbiz.de/10009357762

Humps in the Volatility Structure of the Crude Oil Futures Market

Chiarella, Carl; Kang, Boda; Nikitopoulos-Sklibosios, … - Finance Discipline Group, Business School - 2012

stochastic volatility specification. Factor hedging, which takes into account shocks to both the volatility processes and the …

Persistent link: https://www.econbiz.de/10010643370

Small Traders in Currency Futures Markets Format

Chiarella, Carl; Rothig, Andreas - Finance Discipline Group, Business School - 2010

This study examines the interrelation between small traders' open interest and large hedging and speculation in the …

Persistent link: https://www.econbiz.de/10008492096

Simulated Swaption Delta-Hedging in the Lognormal Forward Libor Model

Dunn, Tim; Schlögl, Erik; Barton, Geoff - Finance Discipline Group, Business School - 2000

Alternative approaches to hedging swaptions are explored and tested by simulation. Hedging methods implied by the Balck … distributions for the hedging profit and loss - even at high rehedging frequencies. This result demonstrates the robustness of the … Black hedging technique and implies that - being simpler and generally better understood by financial practitioners - it …

Persistent link: https://www.econbiz.de/10004984511

Hedging, Speculation, and Investment in Balance-Sheet Triggered Currency Crises

Röthig, Andreas; Semmler, Willi; Flaschel, Peter - Finance Discipline Group, Business School - 2006

. We find that, depending on whether futures contracts are used for risk reduction (i.e., hedging) or risk taking (i …

Persistent link: https://www.econbiz.de/10005073656