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Persistent link: https://www.econbiz.de/10001450616
We consider two sequences of Markov chains inducing equivalent measures on the discrete path space. We establish conditions under which these two measures converge weakly to measures induced on the Wiener space by weak solutions of two SDEs, which are unique in the sense of probability law. We...
Persistent link: https://www.econbiz.de/10011544749
We study the term structure of variance swaps, equity and variance risk premia. A model-free analysis reveals a significant price jump component in variance swap rates. A model-based analysis shows that investors' willingness to ensure against volatility risk increases after a market drop. This...
Persistent link: https://www.econbiz.de/10011899885
We explore the term structures of claims to a variety of cash flows: U.S. government bonds (claims to dollars), foreign government bonds (claims to foreign currency), inflation-adjusted bonds (claims to the price index), and equity (claims to future equity indexes or dividends). Average term...
Persistent link: https://www.econbiz.de/10011457568
This paper describes a financial market modelling framework that exploits the notion of a deflator . The denominations of the deflator measured in units of primary assets form a minimal set of basic financial quantities that completely specify the overall market dynamics, where deflated asset...
Persistent link: https://www.econbiz.de/10009612031
This working paper was written by Cho-Hoi Hui (Hong Kong Monetary Authority), Andrew Wong(Hong Kong Monetary Authority) and Chi-Fai Lo (The Chinese University of Hong Kong).This note uses a target-zone model to study the bond yield movements under yield curve control. The bond yield is assumed...
Persistent link: https://www.econbiz.de/10013492071
This paper investigates the forecasting ability of survey data on exchange rate expectations with multiple forecast horizons. The survey forecasts are on the exchange rates of five Central and Eastern European currencies: Czech Koruna, Hungarian Forint, Polish Zloty, Romanian Leu and Slovakian...
Persistent link: https://www.econbiz.de/10009157616
The use of futures exchange contracts instead of forwards completes the maturity spectrum of the correlation between the spot yield and the premium. We find that the forward premium puzzle (FFP) depends significantly on the maturity horizon of the futures contract and the choice of sampling...
Persistent link: https://www.econbiz.de/10012209529
Over the last two decades, the Federal Open Market Committee (FOMC), the rate-setting body of the United States Federal Reserve System, has become increasingly communicative and transparent. According to policymakers, one of the goals of this shift has been to improve monetary policy...
Persistent link: https://www.econbiz.de/10008987100
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...
Persistent link: https://www.econbiz.de/10011576374