Outlines the development of duration as a risk management tool for fixed income securities, shows how it is calculated and gives examples to illustrate its use in assessing risk exposure and immunizing bond portfolio returns against interest rate risk. Cites research confirming its effectiveness...

Refers to previous research on the empirical testing of continuous time, two factor short rate interest models by Chan, Karolyi, Longstaff and Sanders (1992), Vasicek (1997) and Cox, Ingersoll and Ross (1985); and the Nowman (1997, 2000) Gaussian estimation approach. Applies these ideas to...

Outlines recent research on short term interest rate models and applies Baron‐Adesi et al’s (1999) Box method to value default free bonds and contingent claims. Uses Episcopo’s (1999) historical interbank estimates of the Chan, Karolyi, Longstaff and Sanders (1992) model for Australia,...

Explains the rating system for US municipal bonds and its effect on borrowing costs, reviews relevant research and provides a study of the factors affecting grading by rating agencies in Virginia using 1995 data. Explains the methodology and presents the results, which identify five significant...

The paper explores the implications for monetary policy from the greater integration of major capital markets since 1980 using long‐term interest rates. The empirical approach is the multivariate vector moving average GARCH model, which examines the nature of the spillover mechanism across...

Outlines previous research on the impact of US Federal Reserve policies on market interest rates and returns; and the relationship between interest rates and market returns. Investigates these effects over three time periods: Sept 1974‐Oct 1979 (interest rate targeting through the federal...

Reviews previous research on the announcement effects of changes in US Federal Reserve policies and presents a study of the impact of federal funds rate and discount rate changes since the current chairman took office (1988) on the treasury bills/bonds and stock markets. Uses event study...

Discusses arbitrage pricing theory as a multifactor model for explaining rates of return on securities; and the use of principal components analysis to reduce the number of variables studies. Applies these ideas to returns on treasury bills and government bonds for 1,000 business days ending in...

Outlines Heath, Jarrow and Morton’s (1992) method (MJM) for modelling interest rates and refers to other research showing that although it is generally non‐Markov, this can be modified if the volatility structure depends on relative maturity term rather than calendar maturity date. Develops...