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Despite the single currency, yields on government bonds in the Euro Area deviate from German bond yields. These bond spreads are usually attributed to differing default and liquidity risks. Recent research points out that time-varying global factors, approximated by risk measures or short term...
Persistent link: https://www.econbiz.de/10010265252
The main goal of this paper is to examine the relationship between macroeconomic shocks and yield curve movements in Hungary. To this end, we apply a Nelson-Siegel type dynamic yield curve model, where changes of the yield curve are driven by two latent factors and some key macro variables that...
Persistent link: https://www.econbiz.de/10010322460
The paper investigates the effect of interest rate variance on the shape of the yield curve using a bivariate 2-state Markov switching model for the short rate changes and the yield curve slope. The two states are characterized by the variance of the short rate changes: Low and high variance. In...
Persistent link: https://www.econbiz.de/10014120001
A mark-to-market approach for convertible bonds is proposed where the volatility from the bond optionality is implied from the traded credit spread and bond price. By linking the convertible bond implied volatility to the listed equity option implied volatility surface, the set of available...
Persistent link: https://www.econbiz.de/10013250290
This paper presents a new procedure for forecasting recessions utilizing short-term (slope) dynamics present in the yield curve. Building on a large body of literature chronicling the relationship between the shape of the yield curve and the business cycle, this paper employs Dynamic...
Persistent link: https://www.econbiz.de/10013002158
The new structural model of credit risk based on a normal firm value diffusion process can infer the firm value volatility from bank credit spreads that closely agreeing with the empirically estimated firm value volatility. We use the spread-implied firm value volatility as the model volatility...
Persistent link: https://www.econbiz.de/10012969039
In this paper, we examine the forecasting ability of an affine term structure framework that jointly models the markets for Treasuries, inflation-protected securities, inflation derivatives, and oil future prices based on no-arbitrage restrictions across these markets. On the methodological...
Persistent link: https://www.econbiz.de/10012970064
Using a new structural model of credit risk based on the normal instead of the lognormal firm value dynamics and market price implied asset value volatility as the model volatility input, we quantify the value of credit spreads of the four largest U.S. banks had their senior unsecured bonds...
Persistent link: https://www.econbiz.de/10012956317
The purpose of this paper is to shed new light on the conflicting empirical evidence on the relationship between credit spreads and Treasury rates. Following a general-to-specific modelling approach, we were unable to accept the presence of a long-run relationship between Baa credit spreads and...
Persistent link: https://www.econbiz.de/10013027576
This paper investigates the price formation of credit risk premia across European sovereign countries. A metric of such premia is retrieved under the statistical measure using bootstrap techniques on hedging portfolios. This latter is retrieved in the cash-synthetic market by means of comparison...
Persistent link: https://www.econbiz.de/10012982998