Imagine there exist markets for yield futures contracts as well as ordinary price futures contracts. • Intuitively one would think that a combined use of yield futures contracts and price futures contracts ought to provide a reasonable strategy for insuring revenue. • In the paper this idea is made precise. It is shown that revenue can be secured in by a combined replication of these two contra...

Groundwater-fed irrigation has supported growth in agricultural production around the world by allowing farmers to buffer production against the risks associated with variable and uncertain climatic conditions. However, uncontrolled exploitation has also led to rapid rates of groundwater depletion in many semi-arid and arid regions that threaten farmers' long-term capacity to adapt to future cl...

This paper has two objectives. First we will construct a general model for the variation in the term structure of interest rates, or to put it another way, we will define a general model for the shift function. Secondly, we will specify a Risk model which uses the shift function derived in the first part of the paper as its main building block. Using Principal Component Analysis (PCA) we show t...

In the asset pricing literature, time-variation in market expected excess return tracked by financial ratios like dividend yield is typically attributed either to changing risk, related to the business cycle, or irrational mispricing. Extending the work on asset allocation and dividend yield by Kandel and Stambaugh (1996) to accommodate variation in risk as well as expected return, we develop B...

Dsm INSTRUMENTS of comparable risk level and maturity and with similar provisions do not necessarily have the same market yield. Moreover, the yield differentials between different instruments of comparable risk level and maturity vary considerably over time. In June, 1964, for example, the yield differential between AA-rated utility bonds and government bonds of the same maturity was 30 basis ...

We study the effect of risk aversion on the valuation of credit derivatives. Using the technology of utility-indifference valuation in intensity-based models of default risk, we analyze resulting yield spreads for single-name defaultable bonds, and a simple representative two-name credit derivative. The impact of risk averse valuation on prices and yield spreads is expressed in terms of effecti...

A Bayesian Updating Approach to Crop Insurance Ratemaking by Stephen Milton Stohs Doctor of Philosophy in Agricultural and Resource Economics University of California, Berkeley Professor Peter Berck, Chair The U.S. government operates the multiple peril crop insurance (MPCI) program to provide farmers with comprehensive protection against yield risk due to weather-related causes of loss and cer...

We investigate whether bonds can hedge volatility risk in the U.S. Treasury market, as predicted by most ‘affine’ term structure models. To this end, we construct powerful and model-free empirical measures of the quadratic yield variation for a cross-section of fixed-maturity zero-coupon bonds (‘realized yield volatility’) through the use of high-frequency data. We find that the yield curve fai...