We examine the informational content of TIPS yields from the viewpoint of a general 3-factor no-arbitrage term structure model of inflation and interest rates. Our empirical results indicate that TIPS yields contained a "liquidity premium" that was until recently quite large (~1%). Key features...

The challenge of international term structure models is to simultaneously account for the properties of interest rate term structures and foreign exchange rates within an arbitrage-free framework. We extend the quadratic term structure models proposed in Leippold and Wu (2002) to multiple...

We propose an affine term structure model which accommodates non-linearities in the drift and volatility function of the short-term interest rate. Such non-linearities are a consequence of discrete beta-distributed regime shifts constructed on multiple thresholds. We derive iterative closed form...

The valuation of corporate debt is an important issue in asset pricing. While there has been an enormous amount of theoretical modeling of corporate bond prices, there has been relatively little empirical testing of these models 1.(...)

This paper developes a model of optimal consumption and portfolio choice for infinitely-lived investors facing stochastic interest rates, solve it using an approximate analytical method, and evaluate the conventional wisdom.

In this paper the authors measure the risk attitudes of bond investors which can be revealed from settled market prices. They present an equilibrium model which focuses on the stochastic behavior of tastes in addition to the dynamics of investor beliefs.

(...) We provide support for the disposition effect. Participants who experience a gain sell their assets more rapidly than participants who experience a loss, and positively framed subjects generally sell their assets later than negatively framed subjects.

Stylized facts on output and interest rates in the U.S. have so far proved hard to match with business cycle models. But these findings do not acknowledge that the economy might well be driven by different shocks, and by each in different ways. I estimate covariances of output, nominal and real...

In this paper we adopt a principal components analysis (PCA) to reduce the dimensionality of the term structure and employ autoregressive models (AR) to forecast principal components which, in turn, are used to forecast swap rates. Arguing in favor of structural variation, we propose data...

We construct a factor model of the yield curve and specify time series processes forthese factors, so that the innovations are mutually orthogonal. At the same time,the factors are constructed in such a way that they assume clear, intuitive interpretations.The resulting “intelligible...