Risk Premia With Markov Regimes And The Term Structure Of Interest Rates
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Risk Premia With Markov Regimes And The Term Structure Of Interest Rates
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Author : Zacharias Psaradakis
language : en
Publisher:
Release Date : 2002
Risk Premia With Markov Regimes And The Term Structure Of Interest Rates written by Zacharias Psaradakis and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2002 with Economics categories.
An Econometric Model Of The Term Structure Of Interest Rates Under Regime Switching Risk
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Author : Shu Wu
language : en
Publisher:
Release Date : 2008
An Econometric Model Of The Term Structure Of Interest Rates Under Regime Switching Risk written by Shu Wu and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2008 with categories.
This paper develops and estimates a continuous-time model of the term structure of interests under regime shifts. The model features an analytically simple representation of Markov regime shifts that helps elucidate the effect of regime shifts on the yield curve and give a clear interpretation of regime-switching risk premiums. The model falls within the broad class of essentially affine models with a closed form solution of the yield curve, yet it is flexible enough to accommodate priced regime-switching risk, time-varying transition probabilities, regime-dependent mean reversion coefficients as well as stochastic volatilities within each regime. A two-factor version of the model is implemented using Efficient Method of Moments. Empirical results show that the model can account for many salient features of the yield curve in the U.S.
A Hidden Markov Chain Model For The Term Structure Of Bond Credit Risk Spreads
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Author : Lyn C. Thomas
language : en
Publisher:
Release Date : 2001
A Hidden Markov Chain Model For The Term Structure Of Bond Credit Risk Spreads written by Lyn C. Thomas and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2001 with categories.
This paper provides a Markov chain model for the term structure and credit risk spreads of bond prices. It allows dependency between the stochastic process modeling the interest rate and the Markov chain process describing changes in the credit rating of the bonds by their mutual dependency on a hidden Markov chain, which can be thought of as describing the underlying economic conditions. The model also allows a new interpretation of risk premia used in previous approaches and also uses a linear programming approach to strip the bonds of their coupons in such a way as to guarantee there is no mis-pricing.
Risk Premia In The Term Structure Of Interest Rates
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Author : Dennis Bams
language : en
Publisher:
Release Date : 2000
Risk Premia In The Term Structure Of Interest Rates written by Dennis Bams and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2000 with Interest rate risk categories.
Switching Varma Term Structure Models
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Author : Alain Monfort
language : en
Publisher:
Release Date : 2007
Switching Varma Term Structure Models written by Alain Monfort and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2007 with Interest rates categories.
Macroeconomic Risk Revisited
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Author : Edward Golosov
language : en
Publisher:
Release Date : 2017
Macroeconomic Risk Revisited written by Edward Golosov and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017 with categories.
Under what conditions can the term structure of risk premia be downward sloping, as reported in a number of recent empirical studies? I study fixed income and equity risk premium term structures and the long run risk in a continuous time Lucas-style economy subject to a persistent regime change modelled as a two-state Markov chain with a representative agent having Epstein-Zin-Weil preferences. I derive closed form solutions for the term structures of the risk premia of finite maturity bonds, the equity market and equity dividend strips, as well as the term structure of Sharpe ratio, and clarify under what conditions the risk term structures can be downward sloping. When fitted with historic data for U.S. consumption, this model is capable of generating downward sloping risk premium term structure for the parameters traditionally used in long run risk models.
Risk Premia In The Term Structure Of Interest Rates A Panel Data Approoach
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Author : Dennis Bams
language : en
Publisher:
Release Date : 2000
Risk Premia In The Term Structure Of Interest Rates A Panel Data Approoach written by Dennis Bams and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2000 with categories.
Switching Varma Term Structure Models
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Author : Alain Monfort
language : en
Publisher:
Release Date : 2010
Switching Varma Term Structure Models written by Alain Monfort and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2010 with categories.
The purpose of this article is to propose a global discrete-time modeling of the term structure of interest rates which is able to capture simultaneously the following important features: (i) a historical dynamics of the factor driving term structure shapes involving several lagged values, and switching regimes; (ii) a specification of the stochastic discount factor (SDF) with time-varying and regime-dependent risk-premia; (iii) explicit or quasi explicit formulas for zero-coupon bond (ZCB) and interest rate derivative prices. We develop the switching autoregressive normal (SARN) and the switching vector autoregressive normal (SVARN) Factor-Based Term Structure Models of order p. The factor is considered as a latent variable or an observable variable: in the second case the factor is a vector of several yields. Regime shifts are described by a Markov chain with (historical) nonhomogeneous transition probabilities. An empirical analysis of bivariate VAR(p) and SVARN(p) Factor-Based Term Structure Models, using monthly observations of the U.S. term structure of interest rates, and a goodness-of-fit and expectation hypothesis puzzle comparison with competing models in the literature, shows the determinant role played by the observable nature of the factor, lags, and switching regimes in the term structure modeling.
Fed Funds Rate Targeting Monetary Regimes And The Term Structure Of Interbank Rates
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Author : Vassil A. Konstantinov
language : en
Publisher:
Release Date : 2002
Fed Funds Rate Targeting Monetary Regimes And The Term Structure Of Interbank Rates written by Vassil A. Konstantinov and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2002 with categories.
We present an arbitrage-free model of the term structure of interest rates where the short rate is subject to rare jumps of predetermined magnitudes. A two dimensional hidden Markov switching process governs the jump probabilities. We apply the model to the targeting process of the Federal Reserve, interpreting the jumps as changes to the federal funds target, and the short rate as the market federal funds rate. We calibrate the model with money market and interbank spot curves, using an EM algorithm. The smoothed inference of the regime fits well with the historical evidence on the monetary policy stance. The model generates time-varying term premia at business cycle frequencies. The slow variation of the jump risk premia causes the expectations hypothesis of the term structure to break down at yearly horizons. We are able to qualitatively replicate the quot;predictability smilequot; in Campbell-Shiller yield spread regressions.
Hidden Markov Models In Finance
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Author : Rogemar S. Mamon
language : en
Publisher: Springer
Release Date : 2014-05-14
Hidden Markov Models In Finance written by Rogemar S. Mamon and has been published by Springer this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014-05-14 with Business & Economics categories.
Since the groundbreaking research of Harry Markowitz into the application of operations research to the optimization of investment portfolios, finance has been one of the most important areas of application of operations research. The use of hidden Markov models (HMMs) has become one of the hottest areas of research for such applications to finance. This handbook offers systemic applications of different methodologies that have been used for decision making solutions to the financial problems of global markets. As the follow-up to the authors’ Hidden Markov Models in Finance (2007), this offers the latest research developments and applications of HMMs to finance and other related fields. Amongst the fields of quantitative finance and actuarial science that will be covered are: interest rate theory, fixed-income instruments, currency market, annuity and insurance policies with option-embedded features, investment strategies, commodity markets, energy, high-frequency trading, credit risk, numerical algorithms, financial econometrics and operational risk. Hidden Markov Models in Finance: Further Developments and Applications, Volume II presents recent applications and case studies in finance and showcases the formulation of emerging potential applications of new research over the book’s 11 chapters. This will benefit not only researchers in financial modeling, but also others in fields such as engineering, the physical sciences and social sciences. Ultimately the handbook should prove to be a valuable resource to dynamic researchers interested in taking full advantage of the power and versatility of HMMs in accurately and efficiently capturing many of the processes in the financial market.