The Bond Price Support Program as a Change in Policy Regimes: Evidence from the Term Structure of Interest Rates

1991 ◽  
Vol 23 (3) ◽  
pp. 367 ◽  
Author(s):  
William K. Hutchinson ◽  
Mark Toma
Keyword(s):  
Interest Rates ◽  
Term Structure ◽  
Support Program ◽  
Price Support ◽  
Bond Price ◽  
Policy Regimes

scholarly journals The effects of monetary policy regime shifts on the term structure of interest rates

2015 ◽  
Vol 19 (2) ◽  
Author(s):  
Azamat Abdymomunov ◽  
Kyu Ho Kang
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Term Structure ◽  
Regime Shifts ◽  
Policy Regime ◽  
Policy Regimes ◽  
Term Structure Model ◽  
Price Of Risk ◽  
Free Dynamic ◽  
Do So

AbstractWe investigate how the entire term structure of interest rates is influenced by changes in monetary policy regimes. To do so, we develop and estimate an arbitrage-free dynamic term-structure model which accounts for regime shifts in monetary policy and price of risk. Our results for US data from 1985 through 2008 indicate that (

THE ENTROPY THEORY OF BOND OPTION PRICING

2002 ◽  
Vol 05 (04) ◽  
pp. 355-383 ◽  
Author(s):  
LES GULKO
Keyword(s):  
Interest Rates ◽  
Term Structure ◽  
Price Change ◽  
Price Volatility ◽  
Market Uncertainty ◽  
Bond Price ◽  
Entropy Functional ◽  
Black Scholes ◽  
Option Model ◽  
Bond Option

An informationally efficient price keeps investors as a group in the state of maximum uncertainty about the next price change. The Entropy Pricing Theory (EPT) captures this intuition and suggests that, in informationally efficient markets, perfectly uncertain market beliefs must prevail. When the entropy functional is used to index collective market uncertainty, then the entropy-maximizing consensus beliefs must prevail. The EPT resolves the ambiguity of arbitrage-free valuation in incomplete markets. The EPT produces a new bond option model that is similar to Black–Scholes' with the lognormal distribution replaced by a beta distribution. Unlike alternative models, the beta model is valid for arbitrary term structure dynamics and for arbitrary credit risk of the underlying bonds. Option replication and hedging under the beta model accounts for random changes in the underlying bond price, price volatility and short-term interest rates.

scholarly journals Modelando a Estrutura a Termo da Taxa de Juros: Dinâmica e Avaliação de Contratos Derivativos

2005 ◽  
Vol 3 (1) ◽  
pp. 19
Author(s):  
Cícero Augusto Vieira Neto ◽  
Pedro L. Valls Pereira
Keyword(s):  
Risk Management ◽  
Interest Rates ◽  
Term Structure ◽  
Continuous Time ◽  
Yield Curve ◽  
Stochastic Calculus ◽  
Fixed Income ◽  
Bond Price ◽  
Operational Strategies ◽  
Multifactorial Model

This article deals with a model for the term structure of interest rates and the valuation of derivative contracts directly dependent on it. The work is of a theoretical nature and deals, exclusively, with continuous time models, making ample use of stochastic calculus results and presents original contributions that we consider relevant to the development of the fixed income market modeling. We develop a new multifactorial model of the term structure of interest rates. The model is based on the decomposition of the yield curve into the factors level, slope, curvature, and the treatment of their collective dynamics. We show that this model may be applied to serve various objectives: analysis of bond price dynamics, valuation of derivative contracts and also market risk management and formulation of operational strategies which is presented in another article.

scholarly journals Stock And Bond Price Dynamics-Evidence From An Emerging Economy

2011 ◽  
Vol 10 (9) ◽  
pp. 93
Author(s):  
M. Venkateshwarlu ◽  
T. Ramesh Babu
Keyword(s):  
Interest Rates ◽  
Stock Returns ◽  
Term Structure ◽  
Stock Prices ◽  
Empirical Studies ◽  
Bond Markets ◽  
Bond Price ◽  
Short Term ◽  
Bond Prices

The motivation for this study is that real stock prices are observed to overreact to changes in interest rates. The real stock prices drop when long-term interest rates rise. It has been observed that bonds and stock prices are typically studied in isolation. The present paper attempts to analyze the dynamic linkages between stock and bond prices in India. One of the important contributions of this study is that in India, very little/almost no work has been done to understand the dynamics of the stock and bond prices after the recent recession. The present study examined the bivariate causal relationship between stock prices and bond prices. In the long term; i.e., periods from 2004 to 2007 and 2008 to 2009, there is no causality from stock market to bond market and vice versa. However, it is found that the bond and stock prices had a bivariate causality in the year 2009 and univariate causality in 2010. The results are interesting and support the view that excess volatility causes granger between the stock and bond markets. This can be inferred as a result of recession investors moving to bond markets and after the signs of recovery the investors might be returning to the stock markets. It is also evident that short-term interest rates have power to forecast short-term stock returns and risk premiums on observation of co-movement between stock and bond prices. This is reiterated by many empirical studies that have shown that the term structure of nominal interest rates contains information potentially useful for the conduct of monetary policy.

The Term Structure of Interest Rates Under Heath–Jarrow–Morton Models with Fast Mean-Reverting Stochastic Volatility

2016 ◽  
Vol 15 (02) ◽  
pp. 1650014
Author(s):  
Sang-Hyeon Park ◽  
Min-Ku Lee ◽  
Jeong-Hoon Kim
Keyword(s):  
Interest Rates ◽  
Stochastic Volatility ◽  
Term Structure ◽  
Bond Price ◽  
Singular Perturbation Method ◽  
Transform Method ◽  
Interest Rate Term Structure ◽  
The Interest Rate ◽  
Volatility Function ◽  
Estimated Error

This paper is a study of the term structure of interest rates based on the Heath–Jarrow–Morton (HJM) models with Hull–White volatility function. Under fast mean-reverting stochastic volatility, we obtain an analytic formula for an approximate bond price with estimated error using a Markovian transform method combined with a singular perturbation method. The stochastic volatility correction effect against time-to-maturity is revealed so that it can capture more of the complexities of the interest rate term structure.

Monetary policy regimes in Russia: Guidelines for furtherquantitative studies

2017 ◽  
pp. 38-60 ◽  
Author(s):  
A. Pestova
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Interest Rates ◽  
Quantitative Research ◽  
Policy Regimes ◽  
Policy Effects ◽  
Exchange Rate Targeting ◽  
Basic Parameters

This paper analyzes the basic parameters of monetary policy in 2000-2015 in Russia. We provide the overview of tools and objectives of monetary policy of the Bank of Russia and identify the periods of homogeneity of monetary policy regimes: from money base targeting to exchange rate targeting and finally, to interest rates policy. On the basis of this research we develop the recommendations for further quantitative research aimed at estimation of monetary policy effects in Russia.

Strategi Pengelolaan Risiko dan Peningkatan Kualitas Pengelolaan Kas Negara

2017 ◽  
Vol 2 (2) ◽  
pp. 43-54
Author(s):  
Agung Mulyono
Keyword(s):  
Interest Rates ◽  
Financial Risk ◽  
Vector Autoregression ◽  
Secondary Market ◽  
Key Factors ◽  
Bond Price ◽  
Hedging Strategy ◽  
Foreign Loan ◽  
Term Operation ◽  
Loan Interest Rates

Cash management is  one of treasury’s main functions in which has a potential financial risk. A potential financial risk emerges when State Treasurer manages cash surplus and or/ shortages in order to maintain optimum liquidity. By applying Vector Autoregression (VAR) system on empirical data provided by Bank Indonesia and the Ministry of Finance of Indonesia, we found that currency value  flunctuation is a significant factor for repayment value of foreign loan. Interest rates and amount of government’s bond held by foreign investors are also variables impacted on government’s bond price movement in secondary market. Currency value  flunctuation and price of government’s bond in secondary market are the key factors that have to be considered by State Treasurer (BUN) in managing state’s money. Hedging strategy by using derivatif product is possible to be utilized by State Treasurer (BUN) due to it’s flexibility for short-term operation.   Abstrak Pengelolaan kas negara merupakan salah satu fungsi pokok perbendaharaan yang dalam proses pelaksanaannya menyimpan potensi berbagai risiko keuangan. Risiko keuangan, khususnya dalam investasi berpotensi muncul ketika Bendahara Umum Negara (BUN) melakukan kegiatan pengelolaan kelebihan dan/ kekurangan kas dalam rangka menjamin ketersediaan dan optimalisasi kas. Dengan menggunakan analisis Vector Autoregression (VAR) atas data empiris yang diperoleh dari Bank Indonesia dan Kementerian Keuangan Indonesia, penulis menemukan bahwa fluktuasi nilai tukar mata uang merupakan faktor yang signifikan terhadap besaran pembayaran utang luar negeri pemerintah. Tingkat suku bunga acuan dan pergerakan besaran kepemilikan SUN oleh investor asing juga merupakan variabel yang berpengaruh terhadap pergerakan harga SUN di pasar sekunder. Fluktuasi nilai tukar mata uang dan pergerakan harga SUN di pasar sekunder menjadi faktor penting dalam pelaksanaan investasi yang dilakukan BUN dalam rangka pengelolaan kelebihan dan/ kekurangan kas. Berdasarkan hasil tersebut, strategi pengelolaan risiko atau hedging dengan menggunakan produk-produk derivatif dalam pengelolaan kelebihan dan/ kekurangan kas jangka pendek – menengah sangat dimungkinkan karena sifat instrumen derivatif yang fleksibel.

Sign in / Sign up

Export Citation Format

Share Document