This paper studies return predictability in federal funds futures. I show that over the period 1990 to 2018, predictor variables from the literature do not consistently outperform the expectations hypothesis when evaluated out-of-sample. Further, while forecasts from advanced forecasting methods...

Libor is arguably the world's most important number with more than USD 350 trillion of loans and financial contracts referencing this rate. Libor benchmark interest rates are being replaced with alternative reference rates (ARRs). There is no guarantee Libor rates will continue to be quoted...

We use a no-arbitrage essentially affine three-factor model to estimate term premia in US and German ten-year government bond yields. In line with the existing literature, we find that estimated premia have followed a downward trend since the 1980s: from 4.9 per cent in 1981 to 0.7 per cent in...

This paper develops a rich class of discrete-time, nonlinear dynamic term structure models (DTSMs). Under the risk-neutral measure, the distribution of the state vector Xt resides within a family of discrete-time affine processes that nests the exact discrete-time counter-parts of the entire...

The estimation of dynamic no-arbitrage term structure models with a flexible specification of the market price of risk is beset by a severe small-sample problem arising from the highly persistent nature of interest rates. We propose using survey forecasts of a short-term interest rate as...

This paper proposes the use of the two-factor term-structure model of Longstaff and Schwartz (1992a, LS) to estimate the risk-neutral density (RND) of the future short-term interest rate. The resulting RND can be interpreted as the market's estimate of the density of the future short-term...

It is well known that the Cox-Ingersoll-Ross (CIR) stochastic model to study the term structure of interest rates, as introduced in 1985, is inadequate for modelling the current market environment with negative short interest rates. Moreover, the diffusion term in the rate dynamics goes to zero...

This paper constructs a 10-year realized term premium from the 10-year zero coupon Treasury yield in year 0 and the ex post 3-month Treasury yields from years 0 to 10. The realized term premium swung wildly until the mid-1980's, and then fluctuated within a fairly stable range showing no trend....

After the 2008 financial collapse, the now popular measure of implied systemic risk called the absorption ratio was introduced. This statistic measures how closely the economy's markets are coupled. The more closely financial markets are coupled the more susceptible they are to systemic...

It is well known that the CIR model, as introduced in 1985, is inadequate for modelling the current market environment with negative short rates, r(t). Moreover, in the CIR model, the stochastic part goes to zero with the rates, neither volatility nor long term mean change with time, or fit with...