IDEAS home Printed from https://ideas.repec.org/a/oup/jfinec/v12y2014i2p237-277..html
   My bibliography  Save this article

Regime Switching and Bond Pricing

Author

Listed:
  • Christian Gourieroux
  • Alain Monfort
  • Fulvio Pegoraro
  • Jean-Paul Renne

Abstract

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. (JEL: E43, G12)

Suggested Citation

  • Christian Gourieroux & Alain Monfort & Fulvio Pegoraro & Jean-Paul Renne, 2014. "Regime Switching and Bond Pricing," Journal of Financial Econometrics, Oxford University Press, vol. 12(2), pages 237-277.
    • Handle: RePEc:oup:jfinec:v:12:y:2014:i:2:p:237-277.
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1093/jjfinec/nbt019
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Chiara Sabelli & Michele Pioppi & Luca Sitzia & Giacomo Bormetti, 2014. "Multi-curve HJM modelling for risk management," Papers 1411.3977, arXiv.org, revised Oct 2015.
    2. Malik, Sheheryar & Meldrum, Andrew, 2016. "Evaluating the robustness of UK term structure decompositions using linear regression methods," Journal of Banking & Finance, Elsevier, vol. 67(C), pages 85-102.
    3. Haixiang Yao & Xun Li & Zhifeng Hao & Yong Li, 2016. "Dynamic asset–liability management in a Markov market with stochastic cash flows," Quantitative Finance, Taylor & Francis Journals, vol. 16(10), pages 1575-1597, October.
    4. Monfort, Alain & Pegoraro, Fulvio & Renne, Jean-Paul & Roussellet, Guillaume, 2017. "Staying at zero with affine processes: An application to term structure modelling," Journal of Econometrics, Elsevier, vol. 201(2), pages 348-366.
    5. Augustyniak, Maciej & Badescu, Alexandru & Bégin, Jean-François, 2023. "A discrete-time hedging framework with multiple factors and fat tails: On what matters," Journal of Econometrics, Elsevier, vol. 232(2), pages 416-444.

    More about this item

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oup:jfinec:v:12:y:2014:i:2:p:237-277.. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Oxford University Press (email available below). General contact details of provider: https://edirc.repec.org/data/sofieea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.