Nonparametric Analysis of a General Model of the Term Structure of Interest Rates PDF Download
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Author: Shun-Ying Charles Lin
Publisher:
ISBN:
Category : Bonds
Languages : en
Pages : 278
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Book Description
Author: Shun-Ying Charles Lin
Publisher:
ISBN:
Category : Bonds
Languages : en
Pages : 278
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Book Description
Author: Neil D. Pearson
Publisher:
ISBN:
Category :
Languages : en
Pages : 42
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Book Description
Heath, Jarrow, and Morton (1992) present a general framework for modeling the term structure of interest rates which nests most other models as special cases. In their framework, the dynamics of the term structure and the prices of derivative instruments depend only upon the initial term structure and the forward rate volatility functions. Despite their importance, there has been little empirical work studying the forward rate volatility functions. This paper begins to fill this gap by estimating some nonparametric models of the forward rate volatilities. In a univariate model, the form of the forward rate volatility function differs for different maturities, and for some maturities appears not to be a monotonic function of the level of the forward rate. In a bivariate model, a measure of the quot;slopequot; of the term structure seems to have an important impact on the volatility. These results differ from the simple models that have been proposed and used in the literature.
Author: Francois Lhabitant
Publisher:
ISBN:
Category :
Languages : en
Pages : 97
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Book Description
The last two decades have seen the development of a profusion of theoretical models of the term structure of interest rates. This study provides a general overview and a comprehensive comparative study of the most popular ones among both academics and practitioners. It also discusses their respective advantages and disadvantages in terms of bond and/or interest rate contingent claims continuous time valuation or hedging, parameter estimation, and calibration. Finally, it proposes a unified approach for model risk assessment. Despite the relatively complex mathematics involved, financial intuition rather then mathematical rigour is emphasised throughout. The classification by means of general characteristics should enable the understanding of the different features of each model, facilitate the choice of a model in specific theoretical or empirical circumstances, and allows the testing of various models with nested as well as non-nested specifications.
Author: João Caldeira
Publisher:
ISBN:
Category :
Languages : en
Pages : 21
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Book Description
In this paper we consider a novel procedure for forecasting the US yield curve by using the methodology of nonparametric kernel estimation of functional data (NP-FDA). Within this approach, each element of the sample is a monthly yield curve, evaluated at points corresponding to maturities. In this framework we attempt to capture the dynamics present in the sample of curves to forecast future values for the yield at a given maturity without imposing any parametric structure. In order to evaluated forecast performance of the proposed estimator, we consider four forecast horizons and the results are compared with widely known parametric models. Our estimates with NP-FDA present predictive performance superior to its competitors in many situations considered, especially at longer time horizons for long-term maturities. The methodol- ogy applied in this paper may be important for policy makers, fixed income portfolio managers, financial institutions and academics as it may prove useful in the construction of long-term scenarios for the yield curve.
Author: Burton Gordon Malkiel
Publisher: Princeton University Press
ISBN: 1400879787
Category : Business & Economics
Languages : en
Pages : 294
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Book Description
Can expectations alone explain the yield differentials among bonds of different maturities? To what extend do attitudes toward risk and transactions costs influence the behavior of bond investors? Is it possible for the Federal Reserve to "twist" the interest-rate structure in accordance with its policy objectives? These are among the questions treated. Originally published in 1966. The Princeton Legacy Library uses the latest print-on-demand technology to again make available previously out-of-print books from the distinguished backlist of Princeton University Press. These editions preserve the original texts of these important books while presenting them in durable paperback and hardcover editions. The goal of the Princeton Legacy Library is to vastly increase access to the rich scholarly heritage found in the thousands of books published by Princeton University Press since its founding in 1905.
Author: Kenneth B. Dunn
Publisher:
ISBN:
Category : Consumption (Economics)
Languages : en
Pages : 64
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Book Description
Author: Francis A. Longstaff
Publisher:
ISBN:
Category : Interest rates
Languages : en
Pages : 29
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Book Description
Author: Rajna Gibson
Publisher: Now Publishers Inc
ISBN: 1601983727
Category : Business & Economics
Languages : en
Pages : 171
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Book Description
Modeling the Term Structure of Interest Rates provides a comprehensive review of the continuous-time modeling techniques of the term structure applicable to value and hedge default-free bonds and other interest rate derivatives.
Author: Richard Stanton
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
This paper nonparametrically estimates a continuous-time Markov model of term structure dynamics. Due to the quot;aliasing problemquot;, which tells us that the drift and diffusion of the short rate process are not identifiable given only discretely sampled data, previous authors have parameterized at least one of the drift and diffusion functions, leaving open the possibility of misspecification. This paper imposes no parametric restrictions on either the drift or the diffusion, instead deriving and estimating a family of approximations to the true drift and diffusion functions. These approximations are identifiable using only discretely observed data, and for some common parametric models, we find that the approximations are almost indistinguishable from the true drift and diffusion when the sampling frequency is monthly or greater. Estimating the model using daily data on the 3 month Treasury Bill rate over the period January 1965 - July 1995, we find that, while the estimated diffusion is similar to the (parametric) function estimated by Chan, Karolyi, Longstaff and Sanders (1992), there is evidence of substantial nonlinearity in the drift, showing sharply increasing mean reversion as the short rate moves further from its long run mean. Knowing the process governing short term interest rate movements is not enough by itself to price interest rate derivative securities. We also need to know the market price of interest rate risk, the excess return required for an investor to bear a unit amount of additional risk. Previous research has typically assumed this to be identically zero. We explicitly estimate the functional relationship between the market price of interest rate risk and the level of interest rates, using daily excess returns on 6 month vs. 3 month Treasury Bills over the period January 1965 - July 1995, and combine this with the estimated short rate model to price interest rate dependent securities. Incorporating our estimates for the market price of interest rate risk changes the pricing results substantially.
Author: International Monetary Fund
Publisher: International Monetary Fund
ISBN: 1455209589
Category : Business & Economics
Languages : en
Pages : 64
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Book Description
This paper discusses the estimation of models of the term structure of interest rates. After reviewing the term structure models, specifically the Nelson-Siegel Model and Affine Term- Structure Model, this paper estimates the terms structure of Treasury bond yields for the United States with pre-crisis data. This paper uses a software developed by Fund staff for this purpose. This software makes it possible to estimate the term structure using at least nine models, while opening up the possibility of generating simulated paths of the term structure.
