Do bonds span volatility risk in the U.S. treasury market?

a specification test for affine term structure models
  • 37 Pages
  • 1.27 MB
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National Bureau of Economic Research , Cambridge, Mass
Treasury bills -- United States -- Mathematical models, Government securities -- United States -- Mathematical m
StatementTorben G. Andersen, Luca Benzoni.
SeriesNBER working paper series -- no. 12962., Working paper series (National Bureau of Economic Research) -- working paper no. 12962.
ContributionsBenzoni, Luca., National Bureau of Economic Research.
The Physical Object
Pagination37 p. :
ID Numbers
Open LibraryOL17633603M
OCLC/WorldCa106104255

We find that the yield curve fails to span realized yield volatility in the U.S. Treasury market, as the systematic volatility factors are largely unrelated to the cross‐section of yields. We conclude that a broad class of affine diffusive, quadratic Gaussian, and affine jump‐diffusive models cannot accommodate the observed yield volatility Cited by: that the bond markets per se are incomplete and yield volatility risk cannot be hedged by taking positions solely Do bonds span volatility risk in the U.S.

treasury market? book the Treasury bond market. We also advocate using the empirical realized yield volatility measures Cited by: models. We find that the yield curve fails to span realized yield volatility in the U.S.

Treasury market, as the systematic volatility factors are largely unrelated to the cross-section of yields. We conclude that a broad class of affine diffusive, quadratic Gaussian, and affine jump-diffusive models cannot.

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.

NBER Program(s):Asset Pricing 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.

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 Cited by: CiteSeerX - Document Details (Isaac Councill, Lee Giles, Pradeep Teregowda): We investigate whether bonds can hedge 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. 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.

We find that the yield curve fails to span realized yield volatility in the U.S. Treasury market, as the systematic volatility factors are largely unrelated to the cross-section of yields.

We conclude that a broad class of affine diffusive, quadratic Gaussian, and affine jump-diffusive models cannot accommodate the observed yield volatility Author: TORBEN G. ANDERSEN and LUCA BENZONI. Do Bonds Span Volatility Risk in the U.S.

Treasury Market. A Specification Test for Affine Term Structure Models AFA Chicago Meetings Paper, FRB of Chicago Working Paper No. BibTeX @MISC{Andersen06dobonds, author = {Torben G. Andersen and Luca Benzoni and Torben G.

Andersen and Luca Benzoni}, title = {Do bonds span volatility risk in the U.S. Treasury market. We investigate whether bonds span the volatility risk in the U.S. Treasury market, as predicted by most `a±ne' term structure models.

To this end, we construct powerful and model-free empirical measures of the quadratic yield variation for a cross-section of ¯xed-maturity zero-coupon bonds (`realized yield volatility Author: Torben G. Andersen and Luca Benzoni. 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. The U.S. Treasury securities market. U.S. Treasury securities are debt instruments sold by the U.S. government through public auctions and subsequently traded in the secondary market.

Our paper focuses on the most liquid segment of the secondary market, which is the electronic interdealer market for on-the-run Treasury Cited by: 1. A key implication of most affine term structure models is that the quadratic variation of yields on bonds with any maturity is a linear combination of the term structure of bond yields.

As such, these models predict that interest rates volatility risk can be hedged by trading in a portfolio of bonds. "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. Hence, the Treasury market per se is incomplete, as yield volatility risk cannot be hedged solely through Treasury securities.

AB - We propose using model-free yield quadratic variation measures Cited by:   Iceberg. The U.S. Treasury market is much like an iceberg. The more visible and most widely traded part of the market are newer “on-the-run” securities which are the bonds most recently Author: Sunny Oh.

CBOE/CBOT year US Treasury Note Volatility Streaming Chart. Get instant access to a free live streaming chart of the CBOE/CBOT year US Treasury Note Volatility. The chart is intuitive yet. Read about the risks of investing in U.S. Treasury bonds, including interest rate risk, inflation risk, and opportunity costs.

A s with the prior metrics, it is important to note that average trade sizes, as a standalone measure, are an incomplete measure of liquidity.

To the extent that electronic trading platforms and methods are breaking up larger trades into a series of smaller transactions, a decline in average trade sizes may reflect changes to market. On the other hand, the other two risk factors certainly apply to long-term Treasury bonds.

If you hold the bond for its entire year life span, you'll get your initial investment back. In the meantime, however. Downloadable (with restrictions). This paper investigates US Treasury market volatility and develops new ways of dealing with the underlying interest rate volatility risk.

We adopt an innovative approach which is based on a class of model-free interest rate volatility (VXI) indices we derive from options traded on the CBOE. The empirical analysis indicates substantial interest rate volatility Cited by: 4.

The more expensive the options are, the higher the market expects volatility to be. As such, the rise in the index really does mean that the volatility of Treasury bonds has increased by 45% Author: Geoff Considine.

Treasury volatility as measured by realized volatility in the U.S. year Treasury note has fallen to a year low, according to a new report from Bank of America Merrill : Bill Baruch. I. U.S. Treasury Data: Special Characteristics.

A multi-factor term structure model is the foundation for best practice asset and liability management, market risk, economic capital, interest Author: Donald Van Deventer. The U.S. Treasury bond market is among the deepest and most liquid markets in the world.

This gives investors a lot of secure options and the ability to always find a buyer.

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"Some of the risk. Andersen, Torben, and Luca Benzoni. “Do Bonds Span Volatility Risk in the U.S. Treasury Market.

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A Specification Test for Affine Term Structure Models.” Journal of Finance. 65(2):. “Market participants are underestimating the risk of movement in the Treasury market, the risk of higher yields,” said Hiroki Shimazu, an economist in Tokyo at the Japanese unit of MCP Author: Wes Goodman.

WASHINGTON – Staff from the U.S.

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Department of Treasury, the Board of Governors of the Federal Reserve System, the Federal Reserve Bank of New York, the U.S. Securities and Exchange Commission, and the U.S. Commodity Futures Trading Commission today issued a joint report analyzing the significant volatility in the U.S.

Treasury market on Octo Using non-public data from the U. Post-Election Risk Trending Up In Treasuries And The Euro, Down In U.S.

By Bill Luby - You can always tell when the crowd gets long the VIX and ends up on the wrong side of the trade.

Futures trading on the year U.S. Treasury Note Volatility Index (ticker VXTYN) began a week ago, about a month too late for October's whipsaw activity in government bond yields but still Author: Jeff Cox.A risk premium generated by comparing stocks to year U.S. Treasury bonds will be smaller than a risk premium generated by comparing stocks to U.S.

Treasury bills. True The standard deviation of a .