This paper quantifies how variation in real economic activity and inflation in the U.S. influenced the market prices of level, slope, and curvature risks in U.S. Treasury markets. We develop a novel arbitrage-free dynamic term structure model in which bond investment decisions are influenced by...

This paper adopts a novel approach to studying the evolution of interest rate term structure over the U.S. business cycles and to predicting recessions. Applying an effective algorithm, I classify the Treasury yield curve into distinct shapes and find the less frequent shapes intrinsically...

The objective of our work is to study the term structure of interest rates and the sovereign credit spreads of emerging markets. We develop a model from term structure, credit risk and vector autoregressive models, based on the articles by Ang and Piazzesi (2003) and Ang, Dong and Piazzesi...

The evolution of the yields of different maturities is related and can be described by a reduced number of commom latent factors. Multifactor interest rate models of the finance literature, common factor models of the time series literature and others use this property. Each model has advantages...

The uncertainty around future changes to the Federal Reserve target rate varies over time. In our results, the main driver of uncertainty is a "path" factor signaling information about future policy actions, which is filtered from federal funds futures data. The uncertainty is highest when it...

Most central banks effect changes to their target or policy rate in discrete increments (e.g., multiples of 0.25%) following public announcements on scheduled dates. Still, for most applications, researchers rely on the assumption that the policy rate changes linearly with economic conditions...

Most central banks effect changes to their target or policy rate in discrete increments (e.g., multiples of 0.25%) following public announcements on scheduled dates. Still, for most applications, researchers rely on the assumption that the policy rate changes linearly with economic conditions...

This paper considers recent derivatives mismarking cases from Bacon 1996 and Truelove and Steel 1997 through to Piper 2009 and Montserret 2009. The behavioural, institutional, risk-reward and regulatory drivers of these cases are reviewed as well as associated derivatives mismarking techniques...

A callable leveraged constant maturity swap (CMS) spread note allows the holder to benefit from future changes in the spread between two swap interest rates. The issues retains the right to call the note at pre-specified times in the future. The note is priced via Monte Carlo simulation using...

We present an affine arbitrage-free dynamic term-structure model based on a representation of instantaneous forward rates as sum of exponentials. The model, which is Gaussian and belongs to the class of Heath-Jarrow-Morton-type models, is intuitively appealing as a suitable linear combination of...