This paper introduces a novel kind of interest-rate model offering simple analytical pricing formulas for swaps, futures, swaptions, caps and floors. The model is based on an original use of regime-switching features that makes it consistent with the non-linear behavior of interest rates. 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...

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...

Macroeconomic questions involving interest rates generally require a reliable joint dynamics of a large set of variables. More precisely, such a dynamic modelling must satisfy two important conditions. First, it must be able to propose reliable predictions of some key variables. Second, it must...

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...

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 behaviour of risk premia at the short end of the yield curve. These risk premia are neglected by the...

The paper characterizes the optimal tax scheme in an open economy with structural inefficiencies on the labor market and on government size. On analytical grounds first, we show that the economy can use fiscal revaluation to exploit the terms of trade externality and to dampen the impact of an...

We propose two methods to choose the variables to be used in the estimation of the structural parameters of a singular DSGE model. The first selects the vector of observables that optimizes parameter identification; the second the vector that minimizes the informational discrepancy between the...

Over the last decade, France and Spain have experienced property price and residential investment increases which were among the strongest and the lengthiest in the euro area. Although the quality of the underlying data limits the precision of the estimates, the present paper aims at analysing...

MASCOTTE is the new version of the Banque de France's macro-econometric forecasting model. Following the last rebasing of National Accounts (currently at 1995 price), the previous version of the model was simplified, re-specified and re-estimated. The model is essentially used for making...