In order to analyse the interest rate transmission mechanism, we study daily Euro-rates term structure for the US, Germany, and the UK between 1983 and 1997. We estimate multivariate VECM-GARCH models, which take into account moste of the usual features of financial data (non-stationarity,...

The purpose of the paper is to propose a global discrete-time modeling of the term structure of interest rates able to capture simultaneously the following important features: (i) an historical dynamics of the factor driving term structure shapes involving several lagged values, and switching...

In this paper, we propose a model of the joint dynamics of euro-area sovereign yield curves. The arbitrage-free valuation framework involves five factors and two regimes, one of the latter being interpreted as a crisis regime. These common factors and regimes explain most of the fluctuations in...

In this paper, we present a general discrete-time affine framework aimed at jointly modeling yield curves associated with different debtors. The underlying fixed-income securities may differ in terms of credit quality and/or in terms of liquidity. The risk factors follow conditionally Gaussian...

This paper presents a no-arbitrage model of the yield curve that explicitly incorporates the central-bank policy rate. After having estimated the model using daily euro-area data, I explore the behavior of risk premia at the short end of the yield curve. These risk premia are neglected by the...

In order to derive closed-form expressions of the prices of credit derivatives, standard credit-risk models typically price the default intensities, but not the default events themselves. The default indicator is replaced by an appropriate prediction and the prediction error, that is the...

This article proposes an overview of the usefulness of the regime switching approach for building various kinds of bond pricing models and of the roles played by the regimes in these models. Both default-free and defaultable bonds are considered. The regimes can be used to capture stochastic...

We define a disastrous default as the default of a systemic entity. Such an event is expected to have a negative effect on the economy and to be contagious. Bringing macroeconomic structure to a noarbitrage asset-pricing framework, we exploit prices of disaster-exposed assets (credit and equity...

In the aftermath of the crisis, sovereign risk premium differentials have been increasingly widening. Although the perceived risk for core countries remains relatively low, financial markets seem to discriminate among peripheral economies requiring higher risk premia than what is justified by...

We show how to compute patterns of variation over time, both among and within countries, that determine the international term structure of interest rates, using maximum likelihood within a linear Gaussian state-space framework. The simultaneous estimation of common factors (shared by all...