This paper intends to discuss some problematic properties IS-LM and loanable funds together have when dealing with fiscal deficits. Many others have focused on its assumptions for criticism of IS-LM, but I will mainly focus on its fundamental modelling nature. To say more specifically, I will...

The basic asset pricing equation is adapted to include the effects of unemployment, consumers’ expectations, the price level and money supply on money market rates and government bond yields. Expected consumption growth is modelled using European unemployment figures and Eurostat Consumer...

Once upon a time there was a classical financial world in which all the Libors were equal. Standard textbooks taught that simple relations held, such that, for example, a 6 months Libor Deposit was replicable with a 3 months Libor Deposits plus a 3x6 months Forward Rate Agreement (FRA), and that...

We review the main changes in the interbank market after the financial crisis started in August 2007. In particular, we focus on the fixed income market and we analyse the most relevant empirical evidences regarding the divergence of the existing basis between interbank rates with different...

Estimation of benchmark yield curve in developing markets is often influenced by liquidity concentration. Based on an affine term structure model, we develop a long run liquidity weighted fitting method to address the trading concentration phenomenon arising from horizon-induced clientele...

In this paper I discuss the modeling of the yield in discrete time. The popular Nelson-Siegel model and the Vasicek-factors model are presented in the same framework then it is simple to compare them.

The model proposed by Nelson and Siegel (1987) has been used for several researcher to fit the yield curve. In this paper we propose a discrete-time version of that model by using dynamic factors, such that the model is dynamic in the sense proposed by Diebold and Li (2006). We found the exact...

The downward trend exhibited in Chile’s nominal term structure since 2003 has been a common pattern shared by other developed and developing economies. To understand the behavior of the nominal yield curve in Chile, we rely on an affine dynamic term structure model (DTMS) which allows to...

We present a quantitative study of the markets and models evolution across the credit crunch crisis. In particular, we focus on the fixed income market and we analyze the most relevant empirical evidences regarding the divergences between Libor and OIS rates, the explosion of Basis Swaps...

This theoretical note elaborates upon why it is a myth that YTM is viewed as only a promised but not really earned interest rate. It addresses some misconceptions in Shirnani and Wilbratte (2009) on what, between YTM and RCY, is a true rate of return of a coupon bond, why YTM is not just a...