Stochastic Volatilities And Correlations of Bond Yields  

Oleh:

Bing, Han

Jenis: Article from Journal - ilmiah internasional
Dalam koleksi: The Journal of Finance (EBSCO) vol. 62 no. 3 (Jun. 2007), page 1491-1524.
Topik: Stochastic; studies; interest rates; models; bonds; yield; maximum likelihood method; correlation analysis
Fulltext: p 1491.pdf (320.32KB)

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Perpustakaan Pusat (Semanggi) Nomor Panggil: JJ88 Non-tandon: 1 (dapat dipinjam: 0) Tandon: tidak ada

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Isi artikel

I develop an interest rate model with separate factors driving innovations in bond yields and their covariances. It features a flexible and tractable affine structure for bond covariances. Maximum likelihood estimation of the model with panel data on swaptions and discount bonds implies pricing errors for swaptions that are almost always lower than half of the bid - ask spread. Furthermore, market prices of interest rate caps do not deviate significantly from their no - arbitrage values implied by the swaptions under the model. These findings support the conjectures of Collin - Dufresne and Goldstein (2003), Dai and Singleton (2003), and Jagannathan, Kaplin, and Sun (2003).

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