WITHDRAWN: Interest rate volatility, the yield curve, and the macroeconomy

2017 ◽  
Author(s):  
Scott Joslin ◽  
Yaniv Konchitchki
Keyword(s):  
Interest Rate ◽  
Yield Curve ◽  
Interest Rate Volatility

Determinants of Treasury-LIBOR Swap Spreads

2005 ◽  
Vol 08 (04) ◽  
pp. 687-705 ◽  
Author(s):  
D. K. Malhotra ◽  
Vivek Bhargava ◽  
Mukesh Chaudhry
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Default Risk ◽  
Yield Curve ◽  
Short Term ◽  
Long Run ◽  
Interest Rate Volatility ◽  
Short Run ◽  
Using Data ◽  
Swap Spreads

Using data from the Treasury versus London Interbank Offer Swap Rates (LIBOR) for October 1987 to June 1998, this paper examines the determinants of swap spreads in the Treasury-LIBOR interest rate swap market. This study hypothesizes Treasury-LIBOR swap spreads as a function of the Treasury rate of comparable maturity, the slope of the yield curve, the volatility of short-term interest rates, a proxy for default risk, and liquidity in the swap market. The study finds that, in the long-run, swap spreads are negatively related to the yield curve slope and liquidity in the swap market. We also find that swap spreads are positively related to the short-term interest rate volatility. In the short-run, swap market's response to higher default risk seems to be higher spread between the bid and offer rates.

Interest rate volatility and the shape of the term structure

1994 ◽  
Vol 347 (1684) ◽  
pp. 563-576 ◽  
Keyword(s):  
Interest Rate ◽  
Term Structure ◽  
Yield Curve ◽  
Factor Models ◽  
The State ◽  
Rate Curve ◽  
Forward Rate ◽  
State Variables ◽  
Single Factor ◽  
Interest Rate Volatility

This paper analyses the effect of interest rate uncertainty on the shape of the forward rate curve. We consider a broad class of term structure models characterized by an affine relation between the drift and diffusion coefficients of the stochastic process describing the evolution of the state variables and the level of the state variables. For these models, a simple relation exists between the shape of the forward rate curve, the sensitivity of the zero-coupon yield curve to the state variables and the variance-covariance matrix of the state variables. In single factor models this relation implies that minus the convexity of the forward rate curve with respect to a measure of ‘duration’ is equal to the variance of the short rate. The paper explores why it is that, despite the well known shortcomings of single factor models, attempts to fit such models to cross-sections of nominal bond prices nonetheless produce reasonable estimates of interest rate volatility.

Interest rate volatility, the yield curve, and the macroeconomy

2018 ◽  
Vol 128 (2) ◽  
pp. 344-362 ◽  
Author(s):  
Scott Joslin ◽  
Yaniv Konchitchki
Keyword(s):  
Interest Rate ◽  
Yield Curve ◽  
Interest Rate Volatility

scholarly journals Immunization Strategies for Funding Multiple Inflation-Linked Retirement Income Benefits

Risks ◽  
2021 ◽  
Vol 9 (4) ◽  
pp. 60
Author(s):  
Cláudia Simões ◽  
Luís Oliveira ◽  
Jorge M. Bravo
Keyword(s):  
Interest Rate ◽  
Yield Curve ◽  
Risk Measure ◽  
Management Strategies ◽  
Interest Rate Risk ◽  
Insurance Companies ◽  
Retirement Income ◽  
Investment Strategies ◽  
Immunization Strategies ◽  
The Impact

Protecting against unexpected yield curve, inflation, and longevity shifts are some of the most critical issues institutional and private investors must solve when managing post-retirement income benefits. This paper empirically investigates the performance of alternative immunization strategies for funding targeted multiple liabilities that are fixed in timing but random in size (inflation-linked), i.e., that change stochastically according to consumer price or wage level indexes. The immunization procedure is based on a targeted minimax strategy considering the M-Absolute as the interest rate risk measure. We investigate to what extent the inflation-hedging properties of ILBs in asset liability management strategies targeted to immunize multiple liabilities of random size are superior to that of nominal bonds. We use two alternative datasets comprising daily closing prices for U.S. Treasuries and U.S. inflation-linked bonds from 2000 to 2018. The immunization performance is tested over 3-year and 5-year investment horizons, uses real and not simulated bond data and takes into consideration the impact of transaction costs in the performance of immunization strategies and in the selection of optimal investment strategies. The results show that the multiple liability immunization strategy using inflation-linked bonds outperforms the equivalent strategy using nominal bonds and is robust even in a nearly zero interest rate scenario. These results have important implications in the design and structuring of ALM liability-driven investment strategies, particularly for retirement income providers such as pension schemes or life insurance companies.

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