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An Evaluation of Multi-Factor Cir Models Using Libor, Swap Rates, and Cap and Swaption Prices
Kaplin, Andrew - 2010
We evaluate the classical Cox, Ingersoll and Ross (1985) (CIR) model using data on LIBOR, swap rates and caps and … swaptions. With three factors the CIR model is able to fit the term structure of LIBOR and swap rates rather well. The model is … able to match the hump shaped unconditional term structure of volatility in the LIBOR-swap market. However, statistical …
Persistent link: https://www.econbiz.de/10012763074
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Futures Prices as Risk-Adjusted Forecasts of Monetary Policy
Piazzesi, Monika - 2004
Many researchers have used federal funds futures rates as measures of financial markets' expectations of future monetary policy. However, to the extent that federal funds futures reflect risk premia, these measures require some adjustment to account for these premia. In this paper, we document...
Persistent link: https://www.econbiz.de/10012785640
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Determinants of the Japan Premium : Actions Speak Louder than Words
Peek, Joe; Rosengren, Eric S. - 2022
Since August 1995, Japanese banks have had to pay a premium on Eurodollar and Euroyen interbank loans relative to their U.S. and U.K. competitors. This so-called Japan premium' provides a market indicator of investor anxiety about the ability of Japanese banks to repay loans. We examine the...
Persistent link: https://www.econbiz.de/10013323459
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An Empirical Analysis of the Swaption Cube
Trolle, Anders B. - 2010
-series variation of conditional volatility and skewness of the swap rate distributions implied by the swaption cube. We then develop … and skewness of the risk-neutral and physical swap rate distributions. Finally, we investigate the fundamental drivers of …
Persistent link: https://www.econbiz.de/10013135764
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Predictable Changes in Yields and Forward Rates
Backus, David K. - 2010
We consider the patterns in the predictability of interest rates expectations hypothesis (EH), and attempt to account for them with affine models. We make the following points: (i) Discrepancies in the data from the EH take a particularly simple form with forward rates: as theory suggests, the...
Persistent link: https://www.econbiz.de/10012763624
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An Efficient Generalized Discrete-Time Approach to Poisson-Gaussian Bond Option Pricing in the Heath-Jarrow-Morton Model
Das, Sanjiv Ranjan - 2021
Term structure models employing Poisson-Gaussian processes may be used to accommodate the observed skewness and kurtosis of interest rates. This paper extends the discrete-time, pure-Gaussian version of the Heath-Jarrow-Morton model to the pricing" of American-type bond options when the...
Persistent link: https://www.econbiz.de/10013249269
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Interest Rate Expectations Versus Forward Rates : Evidence from an Expectations Survey
Friedman, Benjamin M. - 2022
The object of this paper is to test several familiar hypotheses about the relationship between the forward rates implied by the term structure and interest rate expectations, using the one ongoing systematic survey that samples market participants' expectations. The substitution of survey data...
Persistent link: https://www.econbiz.de/10013323586
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Equity Yields
van Binsbergen, Jules H. - 2011
We study a new data set of prices of traded dividends with maturities up to 10 years across three world regions: the US, Europe, and Japan. We use these asset prices to construct equity yields, analogous to bond yields. We decompose these yields to obtain a term structure of expected dividend...
Persistent link: https://www.econbiz.de/10013120296
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Credit Spreads and Business Cycle Fluctuations
Gilchrist, Simon - 2011
This paper examines the evidence on the relationship between credit spreads and economic activity. Using an extensive data set of prices of outstanding corporate bonds trading in the secondary market, we construct a credit spread index that is--compared with the standard default-risk...
Persistent link: https://www.econbiz.de/10013125576
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Endogenous Liquidity and Defaultable Bonds
He, Zhiguo - 2012
This paper studies the interaction between fundamental and liquidity for defaultable corporate bonds that are traded in an over-the-counter secondary market with search frictions. Bargaining with dealers determines a bond's endogenous liquidity, which depends on both the firm fundamental and the...
Persistent link: https://www.econbiz.de/10013100361