strategies of an investment in the Lehman Brothers Bond index (by up to 5.9 times) and an investment in the S&P index (by up to 5 …

samples and it translates into a bias in pricing bond options and other derivative securities that is important in practical … work. The present paper proposes a very general and computationally inexpensive method of bias reduction for pricing bond … achieves substantial bias reductions in pricing bond options with only mild increases in variance that do not compromise the …

-factor settings with latent variables that are readily interpreted as the conditional mean and volatility of the interest rate, and … dynamics that explain the inadequate performance of nested models. Finally, we explore the bond pricing implications and … perform illustrative calibrations for the yield curve. We select a three-factor specification featuring stochastic volatility …

volatility. These regime shifts reflect changing inflation expectations and shifts in monetary policy, respectively …

the volatility structure of the LIBOR markets …

recent claims in the literature. We find that there is a threshold effect of volatility on the interest rate but this effect … volatility into the quadratic model, generally performs well for all interest rates. The paper suggests that this model is a …

is shown that the nonstationarity of volatility in the regression errors may induce spuriousness of the underlying … nonstationary volatility is present in the errors. Mild nonstationary volatilities do not render the underlying regression spurious …