Regime Switching and Bond Pricing
Alain Monfort (),
Fulvio Pegoraro () and
Working papers from Banque de France
This article proposes an overview of the usefulness of the regime switching approach for building various kinds of bond pricing models and of the roles played by the regimes in these models. Both default-free and defaultable bonds are considered. The regimes can be used to capture stochastic drifts and/or volatilities, to represent discrete target rates, to incorporate business cycles or crises, to introduce contagion, to reproduce zero lower bound spells, or to evaluate the impact of standard or nonstandard monetary policies. From a technical point of view, we stress the key role of Markov chains, Compound Autoregressive (Car) processes, Regime Switching Car processes and multihorizon Laplace transforms.
Keywords: term structure; regime switching; affine models; car process; multi-horizon Laplace transform; contagion; default risk; monetary policy. (search for similar items in EconPapers)
JEL-codes: E43 G12 (search for similar items in EconPapers)
Pages: 49 pages
New Economics Papers: this item is included in nep-fmk, nep-mac and nep-ore
References: Add references at CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed
Downloads: (external link)
https://publications.banque-france.fr/sites/defaul ... g-paper_456_2013.pdf (application/pdf)
Journal Article: Regime Switching and Bond Pricing (2014)
Working Paper: Regime Switching and Bond Pricing (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:bfr:banfra:456
Access Statistics for this paper
More papers in Working papers from Banque de France Banque de France 31 Rue Croix des Petits Champs LABOLOG - 49-1404 75049 PARIS. Contact information at EDIRC.
Bibliographic data for series maintained by Michael brassart ().