|
|
|
|
|
| Wilfling, Bernd. |
| The volatility of interest rates is relevant for many financial applications. Under realistic assumptions the term structure of interest rate differentials provides an important prediction of the term structure of interest rates. This paper derives the term structure of differentials in a situation in which two open economies plan to enter a monetary union in the future. Two systems of floating exchange rates prior to the union are considered, namely a free-float and a managed-float regime. The volatility processes of arbitrary term differentials under the respective pre-switch arrangements are compared. The paper elaborates the singularity of extremely short-term (i.e. instantaneous) interest rates under extensive leaning-against-the-wind intervention... |
| Tipo: Working or Discussion Paper |
Palavras-chave: Interest rate volatility; Term structure; Exchange rate arrangements; Intervention policy; Stochastic processes; Financial Economics; E43; F31; F33; C52. |
| Ano: 2001 |
URL: http://purl.umn.edu/26277 |
| |
|
| |
|
|
| Fendel, Ralf. |
| The paper develops an empirical no-arbitrage Gaussian affine term structure model to explain the dynamics of the German term structure of interest rates. In contrast to most affine term structure models two risk factors are linked to observable macroeconomics factors: output and inflation. The results indicate that the dynamics of the German term structure of interest rates can be sufficiently explained by expected variations in those macroeconomic factors plus an additional unobservable factor. Furthermore, we are able to extract a monetary policy reaction function within this no-arbitrage model that closely resembles empirical reaction functions that are based on the dynamics of the short rate only. |
| Tipo: Journal Article |
Palavras-chave: Affine term structure models; Monetary policy rules; Kalman filter; Financial Economics; E43; E58; G12. |
| Ano: 2008 |
URL: http://purl.umn.edu/50005 |
| |
|
|
| Wilfling, Bernd. |
| The process of international interest rate convergence for arbitrary terms (represented by the term structure of interest rate differentials) is derived in a model of a small open economy which faces a purely time-contingent exchange rate regime switch from flexible to fixed rates. Special attention is paid to a situation in which financial markets deem a delay in the regime switch beyond the publicly announced fixing date possible. The closed-form solution of the term structure allows us to analyze the volatility of interest rate differentials thus providing a useful tool for interest-rate-sensitive security valuation and other risk management applications. Furthermore, the model demonstrates that the economy under consideration has to pay for the... |
| Tipo: Working or Discussion Paper |
Palavras-chave: Exchange rate regime switches; Interest rates; Term structure; Stochastic processes; Uncertainty; Financial Economics; E43; F31; F33. |
| Ano: 2001 |
URL: http://purl.umn.edu/26165 |
| |
|
|
| Xu, Hai Yan; Ward, Bert D.; Nartea, Gilbert V.. |
| This paper uses the one-factor models proposed by Chan, Karolyi, Longstaff and Sanders (CKLS, 1992) to study the short-term interest rate in China. Nine stochastic models of the short-term interest rate were estimated with GMM. For the Chinese one-month inter bank loan rate, the research finds strong evidence for a mean-reverting feature in the short-term interest yield curve, but no evidence was found to indicate that the volatility is highly positively correlated with the level of interest rates. What is more, evidence was found that the CKLS model, the CIR SR model, and the Brennan-Schwartz model are correctly specified to model the Chinese short-term interest rate, so that these three models are able to adequately capture the dynamics of this interest... |
| Tipo: Journal Article |
Palavras-chave: Single-factor models; Mean reversion; GMM estimation; Prediction tests; Financial Economics; C52; E43. |
| Ano: 2007 |
URL: http://purl.umn.edu/50157 |
| |
|
|
| Kugler, Peter; Weder, Beatrice. |
| This paper contributes to the debate about the puzzle of the Swiss Interest Rate Island. It starts out by establishing some stylized facts about the nature of the puzzle. First it shows that long run real returns on Swiss Euro Deposits have been significantly lower than in any other major currency. A decomposition of return differentials into deviations from uncovered interest rate parity and deviations from purchasing power parity reveals that the former contributes most to the puzzle. Two implications follow from these stylized facts: (i) since the puzzle is present in Euro Deposit rates it cannot be due to local factors such as banking secrecy, and (ii) solutions to the puzzle have to provide an explanation for a long run failure of uncovered interest... |
| Tipo: Working or Discussion Paper |
Palavras-chave: Financial Economics; E43; E44; G15. |
| Ano: 2002 |
URL: http://purl.umn.edu/26190 |
| |
|
|
| Antzoulatos, Angelos A.. |
| With the elimination of foreign exchange risk among the E.M.U.-member countries, the yield of, say, French benchmark government bonds (henceforth, the yield) should be equal to that of German bonds, plus some credit and liquidity premia. Since both premia are not likely to change substantially from one day to the other, the yield should move in tandem with the German one and the corresponding spread should remain relatively stable. Yet, the yield exhibits a small but economically and statistically significant undershooting in response to changes in the German one, as a result of which the spread tends to decline when the latter increases, and vice-versa. We propose that the undershooting is the product of lagged adjustment in the European bond portfolios... |
| Tipo: Working or Discussion Paper |
Palavras-chave: Benchmark Government Bonds; E.M.U.; Credit and Liquidity Premia; Bid/Ask Spread; Financial Economics; E43; F36; G11; G15. |
| Ano: 2002 |
URL: http://purl.umn.edu/26207 |
| |
|
|
|
