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This paper is the first to analyze and value early exercises of Individual Investors in fixed-income investment products. Assuming decision and transaction costs we consider that a continuous decision-making on holding or exercising is not optimal anymore and propose a new approach to modeling...
Persistent link: https://www.econbiz.de/10010412103
. This research assess if it is possible successfully use interest rates sensitivity arbitrage in bond portfolio (also known …, being long the first bond while shorting the second (of higher convexity) would result in a market-directional bet for …
Persistent link: https://www.econbiz.de/10012695328
We harvest factors—broad and persistent sources of returns—in US core fixed income in three ways. First, we take strategic over and underweight positions in certain macro factors. While strategic overweights to rates, or duration, and credit factors have historically resulted in...
Persistent link: https://www.econbiz.de/10013323791
There is an annuity puzzle in that the actual allocation by individuals to annuities is low. Longevity bonds, to hedge overall economy-wide mortality risk, have been proposed, but these bonds have challenges and the proponents have not shown how governments are hedged. This paper recommends that...
Persistent link: https://www.econbiz.de/10012843566
diversified strategy in the market, then there is no sudden bankruptcy. After that a deterministic evolutionary bond market is … studied in detail. It is certified that a bond market is evolutionary stable, which is equal to arbitrage-free if and only if … the total returns defined in this paper across all the assets are the same, or each bond is evaluated by an improper …
Persistent link: https://www.econbiz.de/10014220854
Persistent link: https://www.econbiz.de/10012951803
, which naturally widens as risk aversion or trading volume increases. In addition, we analyze the defaultable bond buyer …
Persistent link: https://www.econbiz.de/10013038507
This paper demonstrates that catastrophe (cat) bonds provide substantial benefits of diversification when added to an investor's opportunity set already consisting of securities from traditional asset classes. We find that cat bonds significantly reduce drawdown measures and tail risk under...
Persistent link: https://www.econbiz.de/10012987284
The two-additive-factor Gaussian model G2 (which encompasses the famous twofactor Hull-White model) is a stochastic model which describes the instantaneous short rate dynamic. It has functional qualities required in various practical purposes as in Asset Liability Management and in Trading of...
Persistent link: https://www.econbiz.de/10012989150
zero coupon bond prices: bootstrapping, a piecewise constant forward rates method, a cubic spline model, and the Nelson and … Siegel smoothing model. Next, based on the estimated real and nominal curves, several methodologies to hedge bond portfolios …
Persistent link: https://www.econbiz.de/10012990025