Share
Finance and Economics Discussion Series: Zero Bound, Option-Implied Pdfs, and Term Structure Models
United States Federal Reserve Board
(Author)
·
Don H. Kim
(Author)
·
Bibliogov
· Paperback
Finance and Economics Discussion Series: Zero Bound, Option-Implied Pdfs, and Term Structure Models - United States Federal Reserve Board ; Kim, Don H.
Choose the list to add your product or create one New List
✓ Product added successfully to the Wishlist.
Go to My Wishlists
Origin: U.S.A.
(Import costs included in the price)
It will be shipped from our warehouse between
Monday, July 29 and
Monday, August 05.
You will receive it anywhere in United Kingdom between 1 and 3 business days after shipment.
Synopsis "Finance and Economics Discussion Series: Zero Bound, Option-Implied Pdfs, and Term Structure Models"
This paper points out that several known ways of modeling non-negative nominal interest rates lead to different implications for the risk-neutral distribution of the short rate that can be checked with options data. In particular, Black's boundary models ("interest rates as options") imply a probability density function (pdf) that contains a Dirac delta function and a cumulative distribution function (cdf) that is nonzero at the zero boundary, while models like the CIR and positive-definite quadratic-Gaussian (QG) models have a zero cdf at the boundary. Eurodollar futures options data are found to favor Black's boundary models: the CIR/QG models, even multifactor versions, have difficulty capturing option prices accurately not only in low interest rate environments but also in higher interest rate environments, and data in early 2008 provide an almost tangible signature of the Dirac delta function in Black's boundary pdf models. Options data also contradict the prediction of well-known models whose cdf is zero at the zero boundary, namely that the risk-neutral pdf is always positively skewed.
- 0% (0)
- 0% (0)
- 0% (0)
- 0% (0)
- 0% (0)
All books in our catalog are Original.
The book is written in English.
The binding of this edition is Paperback.
✓ Producto agregado correctamente al carro, Ir a Pagar.
