MARC Record from Library of Congress

LEADER: 02348cam a22003017a 4500
001 2007615206
003 DLC
005 20130601094945.0
007 cr |||||||||||
008 070111s2006 ilu sb f000 0 eng
010 $a 2007615206
040 $aDLC$cDLC
043 $an-us---
050 00 $aHG2401
100 1 $aAndersen, Torben G.$q(Torben Gustav)
245 10 $aDo bonds span volatility risk in the U.S. treasury market?$h[electronic resource] :$ba specification test for affine term structure models /$cTorben G. Andersen, Luca Benzoni.
260 $a[Chicago, Ill.] :$bFederal Reserve Bank of Chicago,$c[2006]
490 1 $aWorking paper series ;$vWP-2006-15
538 $aSystem requirements: Adobe Acrobat Reader.
538 $aMode of access: World Wide Web.
500 $aTitle from PDF file as viewed on 1/11/2007.
530 $aAlso available in print.
504 $aIncludes bibliographical references.
520 3 $a"We investigate whether bonds span the volatility risk in the U.S. Treasury market, as predicted by most 'affine' term structure models. To this end, we construct powerful and model-free empirical measures of the quadratic yield variation for a cross-section of fixed- maturity zero-coupon bonds ('realized yield volatility') through the use of high-frequency data. We find that the yield curve fails to span yield volatility, as the systematic volatility factors are largely unrelated to the cross- section of yields. We conclude that a broad class of affine diffusive, Gaussian-quadratic and affine jump-diffusive models is incapable of accommodating the observed yield volatility dynamics. An important implication is that the bond markets per se are incomplete and yield volatility risk cannot be hedged by taking positions solely in the Treasury bond market. We also advocate using the empirical realized yield volatility measures more broadly as a basis for specification testing and (parametric) model selection within the term structure literature"--Federal Reserve Bank of Chicago web site.
650 0 $aGovernment securities$zUnited States$xEconometric models
700 1 $aBenzoni, Luca.
830 0 $aWorking paper series (Federal Reserve Bank of Chicago. Research Department : Online) ;$vWP-2006-15.
856 40 $uhttp://www.chicagofed.org/economic_research_and_data/wp_abstract.cfm?pubsID=821