Empirically effective bond pricing model for USGBs and analysis on term structures of implied interest rates in financial crisis

Takeaki Kariya, Yoshiro Yamamura and Zhu Wang

Communications in Statistics - Theory and Methods, 2016, vol. 45, issue 6, 1580-1606

Abstract: This paper makes a comprehensive empirical analysis on US Government bond (USGB) prices for a period of 60 months, including the financial crisis in 2008. The model is a cross-sectional model with stochastic discount function that takes into account bond attributes of coupon rate and maturity and that simultaneously values individual fixed-coupon bonds. First, we briefly clarify the theoretical relation between our stochastic discount function approach and the interest rate approach in mathematical finance. Then we propose two specific and effective models. Third, the derived yields are compared to swap rates to see the validity of the models.

Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:taf:lstaxx:v:45:y:2016:i:6:p:1580-1606

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DOI: 10.1080/03610926.2014.901377

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