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Showing 1 to 20 of 22 for “"Term Structure Models"”.
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Estimating dynamic affine term structure models
… some pointed problems in estimating affine term structure models when the price of risk is dynamic, that is, risk factor dependent. The risk neutral parameters are estimated with precision, while the price of risk parameters are not. For the Gaussian models they investigated, these problems …
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Calibrating Term Structure Models to an Initial Yield Curve
… the short rate offers many advantages, with the models explored in this dissertation all offering closed-form, analytic formulae for bond prices and for options on bonds. Often, a vital primary condition is for a model to be calibrated to the initial term structure and to recover the bond prices …
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Term structure models with unspanned factors and unspanned stochastic volatility
Certain models of the term structure of interest rates exhibit unspanned stochastic volatility (USV). A model has this property if it involves a source of stochastic variation — called an unspanned factor — that does not affect the model’s interest rates directly, but does affect the extent to …
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Linear-Rational Term Structure Models With Flexible Level-Dependent Volatility
… the factor process to a class of diffusion models which allows for the degree of state dependence of volatility to be estimated. This dissertation then finds that the estimated state dependent volatility structure is significantly different to that of typical models, where it is set it a …
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Level Dependence in Volatility in Linear-Rational Term Structure Models
… volatility is analysed in the linearrational term structure model. The linear-rational square-root (LRSQ) model, where level dependence is set a priori, is compared to a specification where the factor process follows CEV-type dynamics which allows a more flexible degree of level dependence. …
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The Effects of Multifactor Term Structure Models on the Valuation of Insurance
… model of interest rate changes. Many of these term structure models use only one stochastic variable to project the path of future interest rates. The benefit of one-factor models is that they are simpler to use than multi-factor approaches. This research investigates the importance of …
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Kalman Filtering and the Estimation of Multi-factor Affine Term Structure Models
… true for a majority of multi-factor affine term structure models. Practitioners often recover different parameter optimisations depending on the initial parameters. If these parameters result in different option prices, the implications would be severe. This paper examines these implications …
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Estimation of Shadow-Rate Term Structure Models Near the Zero-Lower Bound
Though it is customary to use standard Gaussian term structure models for term structure modelling, this becomes theoretically implausible in cases when nominal interest rates are near zero: Gaussian models can have arbitrarily large negative rates, whereas arbitrage considerations dictate that …
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Choice of one factor interest rate term structure models for pricing and hedging Bermudan swaptions
… these problems by comparing various one-factor models, including Hull-White, Black-Karasinski and CIR models for the pricing and hedging of long-term Bermudan Swaptions which resembles mortgage loans in banks' books.
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Efficiency and Accuracy of Alternative Implementations of No-Arbitrage Term Structure Models of the Heath-Jarrow-Morton Class
Models of the term structure of interest rates play a central role in the modern theory of pricing bonds and other interest rate claims. Term structure models based on the principle of no-arbitrage, especially those of the Heath-Jarrow-Morton (1992) class, have become very popular recently, both …
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Implementation of Bivariate Unspanned Stochastic Volatility Models
Unspanned stochastic volatility term structure models have gained popularity in the literature. This dissertation focuses on the challenges of implementing the simplest case – bivariate unspanned stochastic volatility models, where there is one state variable controlling the term structure, and one …
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Robustness of bond portfolio optimisation
… bond portfolio selection by proposing the use of term structure models to estimate the time-varying moments of bond returns. Duffee (2002) introduces a distinction between completely affine and essentially affine term structure models. A completely affine model uses a market price of risk …
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An empirical comparison using both the term structure of interest rates and alternative models in pricing options on 90-day BAB futures
The use of the term structure of interest rates to price options is relatively new in the literature. It describes the relationship between interest rates and the maturities of bonds. The first model that described the interest rate process was the Vasicek (1977) model. There have been many studies …
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An introduction to interest rate jumps at deterministic times
… prompted the inclusion of these jumps in recent term-structure models. This dissertation focusses on explaining the effects of jumps that occur at known times on the pricing of bonds. Filipovic (2009) affirms that the transition from the physical measure to the riskneutral measure is key to the …
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Modeling a Two-currency Affine Arbitrage-free Nelson-Siegel Term Structure Model
… provide a general overview of the most popular term structure of interest rate models. In order to understand different features of each model, we classify by means of general characteristics, from single-factor to multi-factor and forward rate based models. Each of these existing term structure …
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Empirical analysis and forecasting of yield curves
In this thesis, we focus on term structure models. An accurate estimate of the current term structure of interest rates plays an important role in many areas of finance. In addition, it is important to forecast the futures term structure. Therefore, a lot of research work is devoted to determining …
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Empirical Essays on Financial Economics
… on the stochastic process assumed for the short-term interest rate as well as the initial interest rate, the time to maturity and the time between settlements. We calibrate a counting process, using historical data, for each firm. These processes represent the time to bankruptcy for each firm. We …
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Essays on Term Structures
This thesis explores two topics on terms structures in two different asset classes,the term structures fit and its predictive power. The second chapter researches the difference and relative goodness of fit of two term structure models, the Cox, Ingersoll and Ross (CIR hereafter) 2-factor model and …
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Modelling Term and Inflation Risk Premia in the South African Bond Market
… of approaches has been used to estimate the term premium of bond yields. Early attempts include linear regression models, such as those of Fama and Bliss (1987) and Cochrane and Piazzesi (2005), but these have been shown to be inconsistent and lacking in robustness (Kim and Orphanides …
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The Performance Of Alternative Interest Rate Risk Measures And Immunization Strategies Under A Heath-Jarrow-Morton Framework
… arbitrage-free technology for modeling the term structure and managing interest rate risk. Yet risk management strategies in the form of immunization portfolios using duration, convexity, and M-square are still widely used in bond portfolio management today. This study addresses the question …
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