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Björk, Tomas (contributor) - 2003 - [Elektronische Ressource]

In this paper, which is a substantial extension of the earlier essay Björk (2001), we give an overview of some recent work on the geometric properties of the evolution of the forward rate curve in an arbitrage free bond market. The main problems to be discussed are as follows. 1. When is a...

Persistent link: https://www.econbiz.de/10001825531

General quadratic term structures of bond, futures and forward prices

Gaspar, Raquel M. (contributor) - 2004 - [Elektronische Ressource]

For finite dimensional factor models, the paper studies general quadratic term structures. These term structures include as special cases the affine term structures and the Gaussian quadratic term structures, previously studied in the literature. We show, however, that there are other,...

Persistent link: https://www.econbiz.de/10001991041

Finite dimensional realizations of forward price term structure models

Gaspar, Raquel M. (contributor) - 2004 - [Elektronische Ressource]

In this paper we study a fairly general Wiener driven model for the term structure of forward prices. The model, under a fixed martingale measure, Q, consists of two infinite dimensional stochastic differential equations (SDEs). The first system is a standard HJM model for (forward) interest...

Persistent link: https://www.econbiz.de/10002450616

The equity premium and the volatility spread : the role of risk-neutral skewness

Feunou, Bruno; Fontaine, Jean-Sébastien; Tedongap, Roméo - 2009

, variance and an independent skewness parameter under both measures. The model predicts that the spread between historical and … risk-neutral volatilities is a function of the risk premium and of skewness. In fact, the equity premium is twice the ratio … of the volatility spread to skewness. We measure skewness from option prices and test these predictions. We find that …

Persistent link: https://www.econbiz.de/10003852916

Ambiguity aversion and the term structure of interest rates

Gagliardini, Patrick; Porchia, Paolo; Trojani, Fabio - 2008

This paper studies the term structure implications of a simple structural economy in which the representative agent displays ambiguity aversion, modeled by Multiple Priors Recursive Utility. Bond excess returns reflect a premium for ambiguity, which is observationally distinct from the risk...

Persistent link: https://www.econbiz.de/10003961717

On the term structure of futures and forward prices

Björk, Tomas; Landén, Camilla - 2000 - Rev. December 20, 2000

models. We also derive two general pricing formulas for futures options. Finally we present an easily applicable sufficient …, by introducing a time dependent function in the drift term. -- term structure ; futures price ; forward price ; options …

Persistent link: https://www.econbiz.de/10009502719

The term structure of bond market liquidity conditional on the economic environment : an analysis of government guaranteed bonds

Schuster, Philipp; Uhrig-Homburg, Marliese - 2012

We analyze the term structure of illiquidity premiums as the difference between the yield curves of two major bond segments that are both government guaranteed but differ in their liquidity. We show that its characteristics strongly depend on the economic situation. In crisis times, illiquidity...

Persistent link: https://www.econbiz.de/10009667173

Time-changed Lévy LIBOR market model for the joint estimation and pricing of caps and swaptions

Leippold, Markus; Stromberg, Jacob - 2012 - This version: May 18, 2012

We propose a novel time-changed L évy LIBOR market model for the joint pricing of caps and swaptions. The time changes are split into three components. The first component allows us to match the volatility term structure, the second generates stochastic volatility, and the third one...

Persistent link: https://www.econbiz.de/10009558358

Managing the risks of corporate bond portfolios : new evidence in the light of the sub‐prime crisis

Barone-Adesi, Giovanni; Carcano, Nicola; Dall'O, Hakim - 2012

We consider modeling errors in the hedging of a portfolio composed from BBB-rated bonds. By doing this, we open a new perspective to the debate on the relationship between corporate bonds and CDS spreads. We find that in ordinary times the added value of indexlinked credit derivatives is very...

Persistent link: https://www.econbiz.de/10009558422

Default compensator, incomplete information, and the term structure of credit spreads

Giesecke, Kay - 2001

We provide a framework for the analysis of term structures of credit spreads on corporate bonds in the presence of informational asymmetries. While bond investors observe default incidents, we suppose that they have incomplete information on the firm's assets and/or the threshold asset level at...

Persistent link: https://www.econbiz.de/10009620780