Analyzing interest rate risk: Stochastic volatility in the term structure of government bond yields
نویسندگان
چکیده
منابع مشابه
Stochastic Volatility , Bond Yields , and the Q Theory of Investment ∗
Recent empirical work using panel data documents that, while the correlation of investment and Tobin’s Q is low, the correlation of investment and credit spreads is high. We propose an explanation for these empirical findings, based on time-varying risk, i.e. stochastic volatility. In our model, firms finance investments using defaultable debt as well as equity issuance, and they are subject to...
متن کاملTerm Structure of Interest Rate Volatility and Macroeconomic Uncertainty ∗
We propose a new model of the yield curve to capture both the dynamics of their conditional mean and the term structure of interest rate volatilities. The new class of affine term structure models exhibits multiple unpriced stochastic volatility factors without imposing constraints on the conditional mean of yields. The common movement in the volatilities extracted from the model provides a new...
متن کاملEfficient Method of Moments Estimation for Jump-Stochastic Volatility, Stochastic mean drift Term Structure of Interest Rate
It summarizes the development of theory and models of interest rate term structure, analyzes and resolves three difficult problems in term structure. They are the nonlinear of mean drift, the conditional heteroskedasticity of volatility and extreme interest rate because of paroxysmal events. It builds the stochastic mean and stochastic volatility interest rate term structure model, SVJ-SD model...
متن کاملPricing variance swaps under stochastic volatility and stochastic interest rate
In this thesis, we study the issue of pricing discretely-sampled variance swaps under stochastic volatility and stochastic interest rate. In particular, our modeling framework consists of the equity which follows the dynamics of the Heston stochastic volatility model, whereas the stochastic interest rate is driven by the Cox-Ingersoll-Ross (CIR) model. We first extend the framework of [119] by ...
متن کاملInterest Rates Term Structure Forecasting and Bond Portfolio Risk Management
The dynamic Nelson-Siegel-style models, which are popular in the literature of interest rates term structure forecasting, may be unstable because of the potential existence of unit roots in the parameter series. In this paper, the dynamic Nelson-Siegel-style models are modified by modelling the first-order differenced instead of original parameter series. Empirical study shows that the modified...
متن کاملذخیره در منابع من
با ذخیره ی این منبع در منابع من، دسترسی به آن را برای استفاده های بعدی آسان تر کنید
ژورنال
عنوان ژورنال: Journal of Banking & Finance
سال: 2012
ISSN: 0378-4266
DOI: 10.1016/j.jbankfin.2012.06.020