This paper considers the estimation in models of the instantaneous short interest rate from a new perspective. Rather than using discretely compounded market rates as a proxy for the instantaneous short rate of interest, we set up the stochastic dynamics for the discretely compounded market...

This paper focuses on a topical and important area of theory and practice ie. The risk premium in financial markets. While there exists a vast amount of research into its behaviour, particularly in US markets, this is largely based on regression based techniques which do not capture well the...

We study a nonlinear filtering problem to estimate, on the basis of noisy observations of forward rates, the market price of interest rate risk as well as the parameters in a particular term structure model within the Heath-Jarrow-Morton family. An approximation approach is described for the...

Within the standard mean-variance framework, this paper provides a procedure to aggregate the heterogeneous beliefs in not only risk preferences and expected payoffs but also variances/covariances into a market consensus belief. Consequently, an asset equilibrium price under heterogeneous...

The paper studies a class of models in which agents' expectations influence the actual dynamics while the expectations themselves are the outcome of some learning processes. Situations of both homogeneous and heterogeneous beliefs are considered. In both cases agents update their expectations by...

Although the HJM term structure model is widely accepted as the most general and perhaps the most consistent, framework under which to study interest rate derivatives, the earlier models of Vasicek, Cox-Ingersoll-Ross, Hull-White, and Black-Karasinki remain popuar among both academics and...

This paper considers the measurement of the equity risk premium in financial markets. While there exists a vast amount of research into its behaviour, particularly in US markets, this is largely based on regression based techniques which do not capture well the dynamic and forward looking nature...

This paper studies the dynamics of the traditional cobweb model with risk averse heterogeneous producers who seek to learn the distribution of asset prices using a geometric decay processes (GDP) - the expected mean and variance are estimated as a geometric weighted average of past observations...

This paper considers a discrete-time model of a financial market with one risky asset and one risk-free asset, where the asset price and wealth dynamics are determined by the interaction of two groups of agents, fundamentalits and chartists. In each period each group allocates its wealth between...

The use of various moving average rules remains popular with financial market practitioners. These rules have recently become the focus of empirical studies. However there have been very few studies on the analysis of financial market dynamics resulting from the fact that some agents engage in...