Showing 1 - 10 of 211
To simultaneously account for the properties of interest-rate term structure and foreign exchange rates within an arbitrage-free framework, we propose a multi-currency quadratic model with an (m+n) factor structure. The m factors model the term structure of interest rates in both countries. The...
Persistent link: https://www.econbiz.de/10012738746
We consider the design and estimation of quadratic term structure models. We start with a list of stylized facts on interest rates and interest rate derivatives, classified into three layers: (1) general statistical properties, (2) forecasting relations, and (3) conditional dynamics. We then...
Persistent link: https://www.econbiz.de/10012740961
We identify and characterize a class of term structure models where bond yields are quadratic functions of the state vector. We label this class the quadratic class and aim to lay a solid theoretical foundation for its future empirical application. We consider asset pricing in general and...
Persistent link: https://www.econbiz.de/10012787099
We propose a new modeling framework to study the asset pricing implications of learning under ambiguity aversion. In a continuous time partial information Lucas economy, we characterize analytically equilibrium equity returns and make the following observations. First, learning under ambiguity...
Persistent link: https://www.econbiz.de/10012737264
We present a geometric approach to discrete time multiperiod mean variance portfolio optimization that largely simplies the mathematical analysis and the economic interpretation of such model settings. We show that multiperiod mean variance optimal policies can be decomposed in an orthogonal set...
Persistent link: https://www.econbiz.de/10012741742
In a Lucas exchange economy with standard power utility, we study asset prices under learning and ambiguous information. In contrast with models featuring only learning or ambiguity, our model is successful in matching the equity premium, the interest rate, and the volatility of stock returns...
Persistent link: https://www.econbiz.de/10012715580
We introduce a new class of derivative products whose payoff is linked to the trend of the underlying instrument. Many institutional and private investors hold their investments for an extended period of time. The time of buying and selling is generally determined by multiple decision factors...
Persistent link: https://www.econbiz.de/10012735145
In this paper, we study the economic benefits from using credit scoring models. We contribute to the literature by relating the discriminatory power of a credit scoring model to the optimal credit decision. Given the Receiver Operating Characteristic (ROC) curve of the credit scoring model, we...
Persistent link: https://www.econbiz.de/10012736952
Credit limit management is of paramount importance for successful short-term credit-risk management, even more so when the situation in credit and financial markets is tense. We consider a continuous-time model where the credit provider and the credit taker interact within a game-theoretic...
Persistent link: https://www.econbiz.de/10012737513
In this paper we discuss the implementation of general one-factor short rate models with a trinomial tree. Taking the Hull-White model as a starting point, our contribution is threefold. First, we show how trees can be spanned using a set of general branching processes. Secondly, we improve...
Persistent link: https://www.econbiz.de/10012739798