This paper makes use of an integrated benchmark modeling framework that allows us to derive term structure equations for bond and forward prices. The benchmark or numeraire is chosen to be the growth optimal portfolio (GOP). For deterministic short rate the solution of the bond term structure...

The ability of the term structure (specifically the term spread, or the difference between the long and short ends of the yield curve) to predict economic activity is empirically well-established for the US, but less so for small open economies. The literature emphasizes the role of monetary...

The social rate of discount is a crucial driver of the social cost of carbon (SCC), i.e. the expected present discounted value of marginal damages resulting from emitting one ton of carbon today. Policy makers should set carbon prices to the SCC using a carbon tax or a competitive permits...

Capital inflow surges destabilise the economy through a maturity shortening mechanism. The underlying reason is that firms have incentives to redeem their debt on demand to accommodate the potential liquidity needs of global investors, which makes international borrowing endogenously fragile....

We compare parametric and machine learning techniques (namely: Neural Networks) for in-sample modeling of the yield curve of the BRICS countries (Brazil, Russia, India, China, South Africa). To such aim, we applied the Dynamic De Rezende-Ferreira five-factor model with time-varying decay...

The aim of this study is to test the ability of the yield curve on US government bonds to forecast the future evolution in the prices of commodities often used in as raw materials. We consider the monthly prices of nine commodities for more than 30 years. Our findings, confirmed by several...

This paper examines the predictive ability of the expectations hypothesis of the term structure of interest rates in the BRICS and G7 countries by relating each country's monthly 3-month Treasury bill rate to 10-year government bond rates, from May 2003 to May 2018. The panel ARDL model,...

This paper studies the predictive power for recessions of the slope of the Swiss term structure using monthly data for 1974-2017. Dynamic probit models indicate that the term structure contains information useful for predicting recessions for horizons up to 19 months. Whether the economy is...

This study examines the impact of changes in the yield curve factors on the Credit Default Swap (CDS) spreads of the U.S. industrial sectors. Stock returns and the crude oil-based volatility index are used in a quantile regression framework to test the validity of Merton's model. The results...

Using option prices, a new method for estimating the term structure of expected stock returns (equity curve) is proposed. We analyse how the equity curve relates to future stock returns and obtain three main results. First, a higher level of the equity curve is associated with higher future...