Regime switching in bond yield and spread dynamics
This doctoral thesis develops regime-switching models of the term structure of interest rates. A general framework is proposed to model the joint dynamics of yield curves associated with different debtors (Chapter 2). This framework is exploited to analyse the fluctuations of ten euro-area sovereign yield curves over the period 1999-2012 (Chapter 3). In this model, a crisis regime is key to account for the increase in spread volatility during the financial crisis. Also, this study shows that market liquidity is an important determinant of bond prices. The model is then completed in order to explore potential causality relationships between two kinds of stresses: liquidity- and credit-related stresses (Chapter 4). Finally, the influence of monetary policy on the yield curve is investigated by means of a term structure model where an innovative use of regime-switching techniques makes it possible to capture salient features of the dynamics of monetary-policy rates (chapter 5).
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- Lars E. O. Svensson, 1994.
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92, Federal Reserve Bank of San Francisco.
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- Wei, Jason Z., 2003. "A multi-factor, credit migration model for sovereign and corporate debts," Journal of International Money and Finance, Elsevier, vol. 22(5), pages 709-735, October.
- Stanton, Richard, 1997. " A Nonparametric Model of Term Structure Dynamics and the Market Price of Interest Rate Risk," Journal of Finance, American Finance Association, vol. 52(5), pages 1973-2002, December.
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