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We extrapolate interest rate yield curves for the purpose of discounting very long-dated pension liabilities and insurance contracts. The extrapolation uses a no-arbitrage term structure model estimated on liquid euro swap instruments with maturities between 5 and 20 years. The extrapolation...
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We address two empirical issues related to the long end of the yield curve based on euro swap rates. First, for maturities longer than 20 years we find evidence for an `excess' downward slope that cannot be explained by convexity. Second, volatility at the very long end of the yield curve is...
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We introduce a robust investment strategy to hedge long dated liabilities under model misspecification and incomplete bond markets. A robust agent who worries about misspecified bond premia follows a min-max expected shortfall criterion to protect against model uncertainty. We employ a backward...
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