We develop a methodology for improving the estimate of the risk premia calculated jointly with the asset sensitivities, extending the McElroy-Burmeister approach for estimating the Arbitrage Pricing Theory (Ross 1976) as a restricted nonlinear multivariate regression model using observed...

Recent empirical research by Mark Taylor and coauthors has found evidence of hybrid dynamics for real exchange rates. While there is a random walk near equilibrium, for real exchange rates some distance from equilibrium there is mean-reversion which increases with the degree of misalignment. An...

Present value calculations require predictions of cash flows both at near and distant future points in time. Such predictions are generally surrounded by considerable uncertainty and may critically depend on assumptions about parameter values as well as the form and stability of the data...

This paper provides a framework for an empirical analysis of the scope for cost minimization in public debt management. It assumes that a debt manager aims at minimizing the expected cost of government’s debt portfolio for a given level of short term interest rate and subject to a number of...

This paper presents an empirical analysis of the efficiency of the UK debt management authorities' (DMA) behaviour from a cost minimisation perspective over the period January 1985 to March 1995. During this period, the maturity structure of the government's bond portfolio was subject to...

This paper sets out to address the issue of equity duration, one of several risk measures available for asset and liability management. Equity duration, as derived from the use of traditional dividend discount models, results in extremely long duration estimated for equities - often in excess of...

Textbook treatment the valuation of warrants takes as a state variable the value of the firm and shows that the value of a warrant is equal to that of a call option on the equity of the firm multiplied by a dilution factor. This approach applies only to the case where the firm issues a single...

Recent empirical evidence demonstrates the presence of an important long memory component in realized asset return volatility. We specify and estimate multivariate models for the joint dynamics of stock returns and volatility that allow for long memory in volatility without imposing this...

There exist dual-listed stocks which are issued by the same company in some stock markets. Although these stocks bare the same firm-specific risk and enjoy identical dividends and voting policies, they are priced differently. Some previous studies show this seeming deviation from the law of one...

Asymptotic properties of jump tests rely on the property that any jump occurs within a single time interval no matter what the observation frequency is. Market microstructure effects in relation to news-induced revaluation of the underlying variable is likely to make this an unrealistic...