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Bond pricing under Knightian uncertainty : a short rate model with drift and volatility uncertainty

Hölzermann, Julian - 2018

It is shown how to construct an arbitrage-free short rate model under uncertainty about the drift and the volatility. The uncertainty is represented by a set of priors, which naturally leads to a G-Brownian motion. Within this framework, it is shown how to characterize the whole term structure...

Persistent link: https://www.econbiz.de/10011891263

Belief-neutral efficiency in financial markets

Beißner, Patrick; Riedel, Frank - 2025

Heterogeneous beliefs among market participants can lead to questionable speculative trading that goes beyond any risk … pricing for ambiguous contracts, without compromising legitimate risk-hedging activities. While Arrow-Debreu equilibria …

Persistent link: https://www.econbiz.de/10015272951

Epstein-Zin Preferences and their Use in Macro-Finance Models : Implications for Optimal Monetary Policy

Darracq Pariès, Matthieu - 2010

as they allow to substantially increase risk aversion, and consequently generate non-trivial risk premia, without … considered. The level and the dynamic pattern of risk premia are also markedly altered. We show that the effect of Epstein …

Persistent link: https://www.econbiz.de/10013142873

Epstein-Zin preferences and their use in macro-finance models : implications for optimal monetary policy

Darracq Pariès, Matthieu; Loublier, Alexis - 2010

they allow to substantially increase risk aversion, and consequently generate non-trivial risk premia, without compromising … considered. The level and the dynamic pattern of risk premia are also markedly altered. We show that the effect of Epstein …

Persistent link: https://www.econbiz.de/10003973549