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Persistent link: https://www.econbiz.de/10015115169
We study American swaptions in the linear-rational (LR) term structure model introduced. The American swaption pricing problem boils down to an optimal stopping problem that is analytically tractable. It reduces to a free-boundary problem that we tackle by the local time-space calculus. We...
Persistent link: https://www.econbiz.de/10011516038
We develop a novel contract design, the fed funds futures (FFF) variance futures, which reflects the expected realized basis point variance of an underlying FFF rate. The valuation of short-term FFF variance futures is completely model-independent in a general setting that includes the cases...
Persistent link: https://www.econbiz.de/10011293604
Over the last decade, dividends have become a standalone asset class instead of a mere side product of an equity investment. We introduce a framework based on polynomial jump-diffusions to jointly price the term structures of dividends and interest rates. Prices for dividend futures, bonds, and...
Persistent link: https://www.econbiz.de/10011874740
We introduce the class of linear-rational term structure models in which the state price density is modeled such that bond prices become linear-rational functions of the factors. This class is highly tractable with several distinct advantages: i) ensures nonnegative interest rates, ii) easily...
Persistent link: https://www.econbiz.de/10010338764
We propose a "debt view" to explain the dominant international role of the dollar and provide broad empirical support for it. Within a simple capital structure model in which firms optimally choose the currency composition of their debt, we derive conditions under which all firms issue debt in a...
Persistent link: https://www.econbiz.de/10011900333
This paper reviews the mortgage-backed securities (MBS) market, with a particular emphasis on agency residential MBS in the United States. We discuss the institutional environment, security design, MBS risks and asset pricing, and the economic effects of mortgage securitization. We also assemble...
Persistent link: https://www.econbiz.de/10013168786
We use a quantile-based measure of conditional skewness (or asymmetry) that is robust to outliers and therefore particularly suited for recalcitrant series such as emerging market returns. Our study is on the following portfolio returns: developed markets, emerging markets, the world, and...
Persistent link: https://www.econbiz.de/10009009566
Although real integration conceptually plays an important role for the comovement of international equity markets, documenting this link empirically has proven challenging. We construct a new dataset of theory-guided, relevant measures of bilateral trade in final and intermediate goods and...
Persistent link: https://www.econbiz.de/10013169023
The failure of uncovered interest rate parity to explain short-term interest rate movements is well documented. We show that short-term changes in long-term interest rates do help to explain short-term exchange rate movements. The relationship gets stronger over our sample period, as the...
Persistent link: https://www.econbiz.de/10009751157