The model proposed by Nelson and Siegel (1987) has been used for several researcher to fit the yield curve. In this paper we propose a discrete-time version of that model by using dynamic factors, such that the model is dynamic in the sense proposed by Diebold and Li (2006). We found the exact...

This paper presents the functional relationship between two areas of interest in contemporary behavioral economics: one concerning choices under conditions of risk, the other concerning choices in time. The paper first presents the general formula of the relationship between decision utility,...

Emerging countries experience real exchange rate depreciations around defaults. In this paper, we examine this observed pattern empirically and through the lens of a dynamic stochastic general equilibrium model. The theoretical model explicitly incorporates bond issuances in local and foreign...

This study adopts a loanable funds model to investigate the impact of budget deficits in the U.S. on long term real interest rates. The study investigates both ex post real 10 year Treasury note yields and ex post real 20 year Treasury bond yields. The study period runs from 1955 through 1987,...

We present a quantitative study of the markets and models evolution across the credit crunch crisis. In particular, we focus on the fixed income market and we analyze the most relevant empirical evidences regarding the divergences between Libor and OIS rates, the explosion of Basis Swaps...

Emerging countries that have defaulted on their debt repayment obligations in the past are more likely to default again in the future than are non-defaulters even with the same debt-to-GDP ratio. This paper explains this stylized fact within a dynamic stochastic general equilibrium framework by...

This theoretical note elaborates upon why it is a myth that YTM is viewed as only a promised but not really earned interest rate. It addresses some misconceptions in Shirnani and Wilbratte (2009) on what, between YTM and RCY, is a true rate of return of a coupon bond, why YTM is not just a...

The European debt crisis that followed the global financial crisis, erupting first with Greece, then Ireland, Portugal, Italy and Spain, has threatened the very existence of the Euro zone. In this paper we examine the evolution of dynamic co-movements of sovereign bond yield spreads (BYS) in the...

This paper addresses the linkages between the monetary policy and the stock market in Pakistan. The estimation technique employed includes Engle Granger two step procedure and the bivariate EGARCH method. The results indicate that any change in the monetary policy stance have a significant...

Estimation of benchmark yield curve in developing markets is often influenced by liquidity concentration. Based on an affine term structure model, we develop a long run liquidity weighted fitting method to address the trading concentration phenomenon arising from horizon-induced clientele...