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Liquidity Premiums And The Expectations Hypothesis

In: Financial Derivatives Pricing Selected Works of Robert Jarrow

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  • Robert A. JARROW

    (Cornell University, Ithaca, NY 14853, USA)

Abstract

Within the term structure of interest rate literature, three different quantifications of the expectations hypothesis are commonly employed. This paper demonstrates under very general conditions that the three quantifications are inconsistent. Each quantification implies a different price for the same bond. The paper concludes with a brief discussion of both the theoretical and empirical implications of these results.

Suggested Citation

  • Robert A. JARROW, 2008. "Liquidity Premiums And The Expectations Hypothesis," World Scientific Book Chapters, in: Financial Derivatives Pricing Selected Works of Robert Jarrow, chapter 10, pages 229-236, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789812819222_0010
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    Cited by:

    1. Shiller, Robert J. & Huston McCulloch, J., 1990. "The term structure of interest rates," Handbook of Monetary Economics, in: B. M. Friedman & F. H. Hahn (ed.), Handbook of Monetary Economics, edition 1, volume 1, chapter 13, pages 627-722, Elsevier.

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