The Impact of News on the Term-Structure of Breakeven Inflation

2009 ◽  
Author(s):  
Anthony P. Rodrigues ◽  
Michelle Steinberg ◽  
Laurel Madar
Keyword(s):  
Term Structure ◽  
The Impact

scholarly journals The impact of fundamental and financial traders on the term structure of oil

2015 ◽  
Vol 48 ◽  
pp. 276-287 ◽  
Author(s):  
Thomas Heidorn ◽  
Frieder Mokinski ◽  
Christoph Rühl ◽  
Christian Schmaltz
Keyword(s):  
Term Structure ◽  
The Impact

HEAT KERNEL MODELS FOR ASSET PRICING

2014 ◽  
Vol 17 (07) ◽  
pp. 1450048 ◽  
Author(s):  
ANDREA MACRINA
Keyword(s):  
Asset Pricing ◽  
Closed Form ◽  
Heat Kernel ◽  
Term Structure ◽  
Risk Premium ◽  
Jump Processes ◽  
Dynamical Equations ◽  
Pricing Kernel ◽  
Kernel Approach ◽  
The Impact

A heat kernel approach is proposed for the development of a novel method for asset pricing over a finite time horizon. We work in an incomplete market setting and assume the existence of a pricing kernel that determines the prices of financial instruments. The pricing kernel is modeled by a weighted heat kernel driven by a multivariate Markov process. The heat kernel is chosen so as to provide enough freedom to ensure that the resulting model can be calibrated to appropriate data, e.g. to the initial term structure of bond prices. A class of models is presented for which the prices of bonds, caplets, and swaptions can be computed in closed form. The dynamical equations for the price processes are derived, and explicit formulae are obtained for the short rate of interest, the risk premium, and for the stochastic volatility of prices. Several of the closed-form models presented are driven by combinations of Markovian jump processes with different probability laws. Such models provide a basis for consistent applications in various market sectors, including equity markets, fixed-income markets, commodity markets, and insurance. The flexible multidimensional and multivariate structure on which the resulting price models are based lends itself well to the modeling of dependence across asset classes. As an illustration, the impact of spiraling debt, a typical feature of a financial crisis, is modeled explicitly, and the contagion effects can be readily observed in the dynamics of the associated asset returns.

scholarly journals Multiscale Analysis on the Pricing of Intensity-Based Defaultable Bonds

2013 ◽  
Vol 2013 ◽  
pp. 1-9
Author(s):  
Sun-Hwa Cho ◽  
Jeong-Hoon Kim ◽  
Yong-Ki Ma
Keyword(s):  
Interest Rate ◽  
Term Structure ◽  
Multiscale Analysis ◽  
Slow Time ◽  
Bond Price ◽  
Constant Intensity ◽  
Interest Rate Derivatives ◽  
Default Intensity ◽  
Defaultable Bonds ◽  
The Impact

This paper studies the pricing of intensity-based defaultable bonds where the volatility of default intensity is assumed to be random and driven by two different factors varying on fast and slow time scales. Corrections to the constant intensity of default are obtained and then how these corrections influence the term structure of interest rate derivatives is shown. The results indicate that the fast scale correction produces a more significant impact on the bond price than the slow scale correction and the impact tends to increase as time to maturity increases.

GEOPOLITICAL RISKS AND THE HIGH-FREQUENCY MOVEMENTS OF THE US TERM STRUCTURE OF INTEREST RATES

2021 ◽  
Author(s):  
RANGAN GUPTA ◽  
ANANDAMAYEE MAJUMDAR ◽  
JACOBUS NEL ◽  
SOWMYA SUBRAMANIAM
Keyword(s):  
Interest Rates ◽  
Term Structure ◽  
Conditional Distribution ◽  
Structural Breaks ◽  
Statistical Tests ◽  
Predictive Ability ◽  
Long Run ◽  
Data Driven Approach ◽  
The Impact ◽  
Geopolitical Risks

We use daily data for the period 25th November 1985 to 10th March 2020 to analyze the impact of newspapers-based measures of geopolitical risks (GPRs) on United States (US) Treasury securities by considering the level, slope and curvature factors derived from the term structure of interest rates of maturities covering 1 to 30 years. No evidence of predictability of the overall GPRs (or for threats and acts) is detected using linear causality tests. However, evidence of structural breaks and nonlinearity is provided by statistical tests performed on the linear model, which indicates that the Granger causality cannot be relied upon, as they are based on a misspecified framework. As a result, we use a data-driven approach, specifically a nonparametric causality-in-quantiles test, which is robust to misspecification due to regime changes and nonlinearity, to reconsider the predictive ability of the overall and decomposed GPRs on the three latent factors. Moreover, the zero lower bound situation, visible in our sample period, is captured by the lower quantiles, as this framework allows us to capture the entire conditional distribution of the three factors. Using this robust model, we find overwhelming evidence of causality from the GPRs, with relatively stronger effects from threats than acts, for the entire conditional distribution of the three factors, with higher impacts on medium- and long-run maturities, i.e., curvature and level factors, suggesting the predictability of the entire US term structure based on information contained in GPRs. Our results have important implications for academics, investors and policymakers.

scholarly journals Volatility Timing: Pricing Barrier Options on DAX XETRA Index

Mathematics ◽  
2020 ◽  
Vol 8 (5) ◽  
pp. 722
Author(s):  
Carlos Esparcia ◽  
Elena Ibañez ◽  
Francisco Jareño
Keyword(s):  
Option Pricing ◽  
Term Structure ◽  
Barrier Options ◽  
Barrier Option ◽  
Probability Term ◽  
Volatility Timing ◽  
The Right ◽  
The Impact ◽  
Complementary Study ◽  
Frequency Current

This paper analyses the impact of different volatility structures on a range of traditional option pricing models for the valuation of call down and out style barrier options. The construction of a Risk-Neutral Probability Term Structure (RNPTS) is one of the main contributions of this research, which changes in parallel with regard to the Volatility Term Structure (VTS) in the main and traditional methods of option pricing. As a complementary study, we propose the valuation of options by assuming a constant or historical volatility. The study implements the GARCH (1,1) model with regard to the continuously compound returns of the DAX XETRA Index traded at daily frequency. Current methodology allows for obtaining accuracy forecasts of the realized market barrier option premiums. The paper highlights not only the importance of selecting the right model for option pricing, but also fitting the most accurate volatility structure.

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