models of the term structure of interest rates

... expectations hypothesis of the term structure, but the regression evidence also provides a useful summary statistic of the changing behavior of the term structure lighting the importance of a shift ... an area of macro-finance research that has examined the relationship between the term structure of interest rates and the economy in an interdisciplinary fashion The modeling of interest rates has ... applications of the Rudebusch-Wu model illustrate the range of issues that such a macrofinance model can address The first of these is an exploration of the source of the Great Moderation the period of reduced...

Ngày tải lên: 17/02/2014, 03:20

... Risk and Term Structure of Interest Rates • The risk structure of interest rates looks at bonds with the same term to maturity and different interest rates • The term structure of interest rates ... n The n-period interest rate equals the average of the one-period interest rates expected to occur over the n-period life of the bond Expectations Theory • Explains why the term structure of interest ... combines the two theories to explain all three facts Term Structure of Interest Rates – Fact Expectations Theory • The interest rate on a long -term bond will equal an average of the short -term interest...

Ngày tải lên: 05/01/2014, 16:56

... case especially the shape of the (past and current) term structure of interest rates We call this variable the change in the systematic factor of the exposure to interest rate risk The variables ... factor of the exposure to interest rate risk and the shape of the term structure? (ii) What factors determine (at bank level) the exposure to interest rate risk? (iii) How profitable is term transformation? ... analyze to what extent changes in the shape of the term structure affect the market value of the banks and (ii) one can estimate the interest rate risk exposure from the banks’ balance sheets Both...

Ngày tải lên: 16/02/2014, 06:20

... level of income • Price-Level effect of an increase in the money supply is a rise in interest rates in response to the rise in the price level • The expected-inflation effect of an increase in the ... rise in the price level causes the demand for money at each interest rate to increase and the demand curve to shift to the right Shifts in the Supply of Money I • Assume that the supply of money ... Money II Changes in the Demand for Money Changes in the Supply of Money Money Supply and Interest Rates I • Income effect of an increase in the money supply is a rise in the interest rate in response...

Ngày tải lên: 05/01/2014, 16:56

... evidence using the MAE metric (se Table 3) strengthens the results reported above The structural EqCM performs the best of all the models at all horizons (with the exception of the horizon of four quarters, ... However, neither of these two hypothesis can be rejected when the rest of the cointegrating vectors are left unrestricted, implying that the hypotheses of PPP and UIP should be combined In the end, ... rate The expression for PPP can then be written (in log-form) as vt = pt − pt* , (1) where pt is the log of the domestic price, pt* is the log of the foreign price, and vt is the log of the nominal...

Ngày tải lên: 15/02/2014, 05:20

... supply, interest rates will tend to rise Changes in the quantity of funds and the rise and fall of interest rates, in turn, affect the condition of the economy -the Gross National Product, the employment ... supplied and the level of interest rates BIBLIOGRAPHY The ABCs of Figuring Interest Federal Reserve Bank of Chicago, 1984 The Arithmetic of Interest Rates Federal Reserve Bank of New York, 1984 ... at an elementary level, the meaning of interest rates; the demand for and supply of credit; the principal credit market participants; the effect of interest rates on the decisions we make concerning...

Ngày tải lên: 15/03/2014, 10:20

... determinants of the variable interest rates in the post-2008 period 4.1 Data Table summarises the data used in the modelling The price lenders have to pay for their funding is a key variable of interest ... particular, the paper assesses the implications of the international financial crisis on the funding costs of Irish institutions The approach also takes into account the implications of the continued ... within the analysis The rest of the paper is outlined as follows: Section provides further information on variable rates in the context of the overall Irish mortgage market; section summarises the...

Ngày tải lên: 15/03/2014, 14:20

... perception of the in‡ ation level, a common fact in the literature on this subject 3.4 The transmission to the term structure The transmission to the term structure of interest rates is obtained by the ... interest rates in the euro area The selection of the short -term interest rates then follows our choice for long -term interest rates and the expectations theory Until 1998, the German bond rates evolved ... second, the presence of some shifts in the short -term nominal endpoint stochastic process, or in other words, in the long -term perception of the level of the short -term interest rates In the appendix...

Ngày tải lên: 22/03/2014, 23:20

... USEFULNESS OF THE TERM STRUCTURE  4.2 Monetary Policy – Predictive power of the YC: USEFULNESS OF THE TERM STRUCTURE  4.2 Monetary Policy – Predictive power of the YC:  Other may argue that the causal ... increase the level of nominal and, in the presence of price rigidities, real short -term interest rates leaving long -term interest rates relatively intact, thus causing the slope of the yield ... USEFULNESS OF THE TERM STRUCTURE  4.1 The usefulness of the slope of yield curve:  Does the yield curve reflect the effects of current or experted future monetary actions alone?  Does the yield...

Ngày tải lên: 14/07/2015, 11:45

... possibilities of the random system Existing Models built in quantum finance are interest rate models, pricing of the interest rate derivatives, computing the correlations of interest rates and equities These ... number of factors which determine the structure of the entire forward rate curve This means that HJM model also cannot capture all the information of the structure of correlation of forward rates ... borrowing money from the lender Interest rates are the key tool in the valuation of all financial derivatives There are three different ways to define interest rates Simple interest rates: Propose a...

Ngày tải lên: 09/09/2015, 08:17

... upon the current level of short -term nominal interest rates, or even solely upon the history of such rates up until the current time (so that the current level of interest rates would be the only ... result of the specification of fiscal policy The effects will not be mechanical consequences of the change in the composition of the assets in the hands of the public, but instead will result from the ... nature of deflationary risks to the U.S — of the advantages of vigorous expansion of the monetary base even when these are not associated with any further reduction in interest rates, of the desirability...

Ngày tải lên: 29/03/2014, 13:20

... function of long -term market interest rates, as a smooth indicator of future changes in money market rates With this in mind, we analyse the term structure of bank pricing for 42 banking markets of the ... line with long -term market interest rates rather than with short -term ones may limit the interest rate risk exposure of the banks given that they typically face a maturity mismatch of their balance ... a function of long -term market interest rates, as a smooth indicator of future changes in money market rates We analyse the term structure of bank pricing for 42 banking markets of the euro area:...

Ngày tải lên: 15/03/2014, 14:20

... function of long -term market interest rates, as a smooth indicator of future changes in money market rates With this in mind, we analyse the term structure of bank pricing for 42 banking markets of the ... line with long -term market interest rates rather than with short -term ones may limit the interest rate risk exposure of the banks given that they typically face a maturity mismatch of their balance ... a function of long -term market interest rates, as a smooth indicator of future changes in money market rates We analyse the term structure of bank pricing for 42 banking markets of the euro area:...

Ngày tải lên: 22/03/2014, 23:20

... Conceptually, the value of the shareholders’ interest can be thought of as a call option on the assets of the firm, with the ability to put the assets to the debt holders if the value of the assets ... tendency of regression toward a mean (e.g., Vasicek and HeathJarrow-Morton models) , the sign of the term will depend on whether interest rates are above or below the mean Another hypothesis is that the ... or a term- structure hypothesis on bankers’ adjustment to interest- rate changes, we will allow the data to provide estimates of the effect of interest- rate and term- structure changes.7 These interest- rate...

Ngày tải lên: 15/03/2014, 14:20

... greater number of degrees of freedom The exclusion of the interbank rate from the model can be adopted because of the high velocity of adjustment of the interbank rate to the policy rate in the 1990s ... in the first period there is a greater difference in the velocity of adjustment of both bank rates towards the long-run equilibrium In particular, the signs of the coefficients show that the interest ... that in the long run the pass-through from money market rates to bank rates has the same size independent of the sign of the shock This is also consistent with the idea that in the long run the equilibrium...

Ngày tải lên: 17/02/2014, 03:20

... explores the evolution of the RMSE of these models over the forecasting period The chart plots the smoothed relative RMSE for the TVP-VAR, TVAR and ST-VAR models at the four-quarter horizon over the ... the initial values of Ht The mean of this log normal prior is set as the log of diag(AOLS QOLS AOLS ) × T0 × k where AOLS is the inverse of the Choleski decomposition of QOLS The variance of ... until the end of the sample period The rolling VAR model uses a ten-year rolling window to estimate the model parameters From an applied point of view, the main virtue of these models is the fact...

Ngày tải lên: 06/03/2014, 14:20

... six-month rates before and after the founding of the Fed The two rates moved together more closely in the later period, as predicted by the expectations theory of the term structure, given the greater ... interest rates This section surveys empirical evidence from the founding of the Fed and from the 1970s that demonstrates the Fed’s theory of the term power over rates Th e evidence supports the expectations ... support for the expectations theory of the term structure (see references in Cook and Hahn (1989)) The standard test of the expectations theory in these papers is to regress the change in the 3-month...

Ngày tải lên: 15/03/2014, 01:20

... Also the and the amount of risk taking is non-linear Regarding variations of the interest rate around the second best, we …nd that lower rates lead to less risk taking regardless of the value of ... process The history of aggregate shocks up to t is st : A summary of the timing of events in our model is presented in Section A of the Appendix 3.1 Households At the beginning of period t; the aggregate ... taxes otherwise Firms Financial and non…nancial …rms di¤er in the way they are funded, in the types of investments they make and the productivity of these investments Financial …rms …nance their...

Ngày tải lên: 15/03/2014, 14:20

... Another 3.1 Time The parser has an theoretical time bound, where is the number of words in the sentence to be parsed, is the number of nonterminal categories in the grammar and is the number of ... in figure The interesting cause of the varying exponents comes from the “constant” terms in the theoretical bound The second half of this paper shows how modeling growth in these terms can accurately ... is the sum of the lengths of all rules in the grammar For trie grammars, it is the number of unique rule prefixes (including the LHS) in the grammar For minimized grammars, it is the number of...

Ngày tải lên: 17/03/2014, 07:20