In this paper, we examine the yield premium of green bonds. We use a matching method, followed by a two-step regression procedure, to estimate the yield differential between a green bond and an otherwise identical synthetic conventional bond from July 2013 to December 2017. The results suggest a...

This study investigates the dynamic effect of credit spread on the performance of banking sector. Based on the analysis of monthly data from 1941M2 to 2013M6, the results indicate that return on the S&P 500 Banks Index 4010 significantly drops following credit spread shock. The decline becomes...

We link equity and treasury bond markets via an informational channel. When macroeconomic state shifts are more probable, informed traders are more likely to have valid signals about fundamentals, so that uninformed traders are less willing to trade against informed ones. This implies low volume...

Monetary policy measures taken by the Federal Reserve as a response to the 2007-09 financial crisis and subsequent economic conditions led to a large increase in the level of outstanding reserves. The Federal Open Market Committee (FOMC) has a range of tools to control short-term market rates in...

Market liquidity and market making – the case of fixed income and low interest rates Market liquidity has received a lot of attention lately, especially in fixed-income markets. This paper studies the determinants of market liquidity in a theoretical model for market making with inventory...

The author proposes a test for the parametric specification of each component in the diffusion matrix of a d-dimensional diffusion process. Overall, d (d-1)/2 test statistics are constructed for the off-diagonal components, while d test statistics are constructed for the main diagonal...

This paper provides extensions to existing procedures for representing one-factor no-arbitrage models of the short rate in the form of a tree. It allows a wide range of drift functions for the short rate to be used in conjunction with a wide range of volatility assumptions. It shows that, if the...

In this paper we investigate the price discovery process in single-name credit spreads obtained from bond, credit default swap (CDS), equity and equity option prices. We analyse short term price discovery by modelling daily changes in credit spreads in the four markets with a vector...

This paper estimates term risk premium and expected future spot rates embedded in Treasury forward rates to study the impact of short-term funding shortages on these quantities. Our approach is consistent with dynamic equilibrium models and avoids the arbitrage-free dynamic inconsistency...

The recent financial crisis offered an interesting opportunity to analyze the markets'; behavior in a high-volatility framework. In this paper, we analyzed the price discovery process of the Italian banks’ Credit Default Swap (CDS) spreads through the Merton model, extended with the inclusion...