The volatility structure of 90-day bill futures traded on the the Sydney Futures Exchange is analysed within the framework of the Heath-Jarrow-Morton model. The method involves characterisation of the transition probability density function for the forward rate process represented by the...

A fairly flexible functional form for the forward rate volatility is applied in the Heath-Jarrow-Morton model of the term structure of interest rates to reduce the system dynamics to Markovian form. The resulting stochastic dynamic system is cast into a form suitable for estimation by use of...

Hedging interest rate exposures using interest rate futures contracts requires some knowledge of the volatility function of the interest rates. Use of historical data as well as interest rate options like caps and swapoptions to estimate this volatility function, have been proposed in the...

A class of volatility functions for the forward rate process is considered, which allows the bond price dynamics in the Heath-Jarrow-Morton (HJM) framework to be reduced to a finite dimensional Markovian system. The use of this Markovian system in estimation of parameters of the volatility...

This paper builds upon the authors' previous work on transformation of the Heath-Jarrow-Morton (HJM) model of the term structure of interest rates to state space form for a fairly general class of volatility specification including stochastic variables. Estimation of this volatility function is...

This paper briefly surveys the various approaches to modelling the zero coupon yield curve is the starting point for much finance research. The method adopted here for the Australian Treasury bond data is based upon polynomial spline fitting, but with the constraint that the long end of the term...

We consider a Heath-Jarrow-Morton models for the term structure of interest rates in which the forward rate volatility is a function of the instantaneous spot rate of interest, a set of dicrete forward rates and time to maturity of the bond. We show how the stochastic dynamics may be expressed...

This paper provides empirical evidence on the linkage between foreign exchange market volatility and daily 90-day covered interest rate parity conditions of the three major exchangerates against the US$. Markov regime shifting models were utilized to generate time series of volatility regime...

Economists have long conjectured that movements in stock prices may involve speculative components. This bubble, as it is usually referred to, is defined as the difference between the market value of a security and its fundamental value. Although there are several important theoretical issues...

This paper examines the issue of co-movement in G7 equity markets. Earlier research in this area has focussed on the first or the second moment of the return process from different markets. The approach in this paper takes the analysis to a finer level to examine the co-movement between these...