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Corporate Yield Spreads : Default Risk or Liquidity? New Evidence from the Credit-Default Swap Market

Longstaff, Francis A. - 2004

We use the information in credit-default swaps to obtain direct measures of the size of the default and nondefault components in corporate spreads. We find that the majority of the corporate spread is due to default risk. This result holds for all rating categories and is robust to the...

Persistent link: https://www.econbiz.de/10012468275

An Empirical Analysis of the Swaption Cube

Trolle, Anders B. - 2010

-series variation of conditional volatility and skewness of the swap rate distributions implied by the swaption cube. We then develop … and skewness of the risk-neutral and physical swap rate distributions. Finally, we investigate the fundamental drivers of …

Persistent link: https://www.econbiz.de/10012462108

Regime-Switching Behavior of the Term Structure of Forward Markets

Tchernykh, Elena - 2005

This paper presents techniques for modelling and estimating the behavior of financial market price or return differentials that follow non-linear regime-switching behaviour. The methodology to be used here is estimation of variants of threshold autoregression (TAR) models. In the basic model the...

Persistent link: https://www.econbiz.de/10012467162

A General Stochastic Volatility Model for the Pricing and Forecasting of Interest Rate Derivatives

Trolle, Anders B. - 2006

We develop a tractable and flexible stochastic volatility multi-factor model of the term structure of interest rates. It features correlations between innovations to forward rates and volatilities, quasi-analytical prices of zero-coupon bond options and dynamics of the forward rate curve, under...

Persistent link: https://www.econbiz.de/10012466328

The Market Price of Credit Risk : An Empirical Analysis of Interest Rate Swap Spreads

Liu, Jun - 2002

financial markets: interest rate swap spreads. Our approach consists of jointly modeling the swap and Treasury term structures … significant. We also find that credit premia in swap spreads are positive on average. These premia, however, vary significantly …

Persistent link: https://www.econbiz.de/10012469724

An Efficient Generalized Discrete-Time Approach to Poisson-Gaussian Bond Option Pricing in the Heath-Jarrow-Morton Model

Das, Sanjiv Ranjan - 1997

Term structure models employing Poisson-Gaussian processes may be used to accommodate the observed skewness and kurtosis of interest rates. This paper extends the discrete-time, pure-Gaussian version of the Heath-Jarrow-Morton model to the pricing" of American-type bond options when the...

Persistent link: https://www.econbiz.de/10012472764

Interest Rate Expectations Versus Forward Rates : Evidence From An Expectations Survey

Friedman, Benjamin M. - 1978

The object of this paper is to test several familiar hypotheses about the relationship between the forward rates implied by the term structure and interest rate expectations, using the one ongoing systematic survey that samples market participants' expectations. The substitution of survey data...

Persistent link: https://www.econbiz.de/10012478855

Benchmark Interest Rates When the Government is Risky

Augustin, Patrick - 2019

across different maturities. Swap rates represent future uncollateralized borrowing between banks. Treasuries should be … expensive and produce yields that are lower than those of maturity matched swap rates, as they are deemed to have superior … explains the negative swap spreads over Treasuries. This view is supported by a quantitative equilibrium model that jointly …

Persistent link: https://www.econbiz.de/10012480372

Expected Returns, Yield Spreads, and Asset Pricing Tests

Campello, Murillo - 2005

We use yield spreads to construct ex-ante returns on corporate securities, and then use the ex-ante returns in asset pricing assets. Differently from the standard approach, our tests do not use ex-post average returns as a proxy for expected returns. We find that the market beta plays a much...

Persistent link: https://www.econbiz.de/10012467360

Can Interest Rate Volatility be Extracted from the Cross Section of Bond Yields? An Investigation of Unspanned Stochastic Volatility

Collin-Dufresne, Pierre - 2004

Most affine models of the term structure with stochastic volatility (SV) predict that the variance of the short rate is simultaneously a linear combination of yields and the quadratic variation of the spot rate. However, we find empirically that the A1(3) SV model generates a time series for the...

Persistent link: https://www.econbiz.de/10012467934