Poor liquidity of corporate bonds in emerging markets deters reliable estimation of credit spreads. As an alternative, credit spreads based on poll data are introduced in India. These spreads are used for pricing new credit instruments and for valuation of bond portfolios. We examine the credit...

About the EditorsThis book contains the recent contributions of Edwin J Elton and Martin J Gruber to the field of investments. All of the articles in this book have been published in the leading finance and economic journals. Sixteen of the nineteen articles have been published in the last ten...

In this paper, we present a multi-factor continuous-time autoregressive moving-average (CARMA) model for the short and forward interest rates. This model is able to present an adequate statistical description of the short and forward rate dynamics. We show that this is a tractable term structure...

Following Waterloo, managing French public finances represented a daunting task. Defeated France had lost a substantial part of its population and territory. The country was partially occupied and France was to pay huge amounts as reparations to the victors. Furthermore, France’s reputation...

We consider a Markov switching regime and price a discount bond using two popular models for the short rate, the Vasicek- and CIR-dynamics. In both cases, an explicit formula is obtained for the bond price which includes the solution of a matrix ODE. Our model is easy to calculate and captures...

In April 2007, Petróleos de Venezuela S.A. (PDVSA) issued debt for USD 7.5billion, the largest debt offering to date by a Latin American company. The conditions surrounding this issue, which was denominated and tradable in dollars, but payable in bolivars, were quite special, particularly when...

We consider a Markov switching regime and price a discount bond using a CIR-type short rate model. An explicit formula is obtained for the bond price which includes the solution of a matrix ODE. Our model is easy to calculate and captures the effect of regime uncertainty in the price and term...

Interest rate swaps are among the most popular derivative contracts. With an interest rate swap, fixed interest payments are exchanged for payments linked to a floating rate. In this paper we develop a dynamic stochastic general equilibrium model to study corporate debt financing and the use of...

This article complements the structural New-Keynesian macro framework with a no-arbitrage term structure model. Whereas our methodology is general, we focus on an extended macro-model with an unobservable time-varying markup and stochastic risk aversion. Term structure information helps to...

We study the term structure implications of the fiscal theory of price level determination. We introduce the intertemporal budget constraint of the government in a general equilibrium model in continuous time. Fiscal policy is set according to a simple rule whereby taxes react proportionally to...