Advances in Risk Management

76 MANAGING INTEREST RATE RISK UNDER NON-PARALLEL CHANGES Table 4.1 Bonds included in portfolios 1 and 2 Bond A B C D Coupon (%) ...

MANUEL MORENO 77 Table 4.2Computations of the generalized convexities and the yield for both portfolios Portfolio 1 Portfolio 2 ...

78 MANAGING INTEREST RATE RISK UNDER NON-PARALLEL CHANGES Table 4.3Relative behavior of the bonds included in the portfolio 1 wi ...

MANUEL MORENO 79 Table 4.4Relative behavior of two portfolios with respect to a parallel change in the yield curve Yield Portfol ...

80 MANAGING INTEREST RATE RISK UNDER NON-PARALLEL CHANGES Table 4.5Relative behavior of the bonds included in the portfolio 1 wi ...

MANUEL MORENO 81 Table 4.6Relative behavior of two portfolios with respect to a decrease in the slope of the yield curve Yield P ...

82 MANAGING INTEREST RATE RISK UNDER NON-PARALLEL CHANGES Table 4.7Relative behavior of the bonds included in the portfolio 1 wi ...

MANUEL MORENO 83 Table 4.8Relative behavior of two portfolios with respect to an increase in the slope of the yield curve Yield ...

84 MANAGING INTEREST RATE RISK UNDER NON-PARALLEL CHANGES based on a continuous-time model for interest rates. This model assume ...

MANUEL MORENO 85 Cox, J.C., Ingersoll, J.E. and Ross, S.A. (1979) “Duration and the Measurement of Basis Risk”,Journal of Busine ...

CHAPTER 5 An Essay on Stochastic Volatility and the Yield Curve Raymond Théoret, Pierre Rostan and, Abdeljalil El-Moussadek∗ 5.1 ...

RAYMOND THÉORET, PIERRE ROSTAN AND ABDELJALIL EL-MOUSSADEK 87 processes, so that the parameters of stochastic volatility models ...

88 AN ESSAY ON STOCHA ST IC VOLATILITY AND T HE YIELD CURVE 5.2 VARIATIONS ON STOCHASTIC VOLATILITY AND CONDITIONAL VOLATILITY^4 ...

RAYMOND THÉORET, PIERRE ROSTAN AND ABDELJALIL EL-MOUSSADEK 89 markets collapses.^5 We will use this distribution in the empirica ...

90 AN ESSAY ON STOCHA ST IC VOLATILITY AND T HE YIELD CURVE the news revealed at timet. That is whyσtis unobserved, contrarily t ...

RAYMOND THÉORET, PIERRE ROSTAN AND ABDELJALIL EL-MOUSSADEK 91 ρ;ηis the coefficient of elasticity. The GARCH(1,1) model is a spe ...

92 AN ESSAY ON STOCHA ST IC VOLATILITY AND T HE YIELD CURVE volatility consequently has an advantage on stochastic volatility in ...

RAYMOND THÉORET, PIERRE ROSTAN AND ABDELJALIL EL-MOUSSADEK 93 Table 5.1Interest-rate term structure models Equilibrium models No ...

94 AN ESSAY ON STOCHA ST IC VOLATILITY AND T HE YIELD CURVE withE(dWt,dWs)=ρand whereWtandWsare two correlated Brownian motions ...

RAYMOND THÉORET, PIERRE ROSTAN AND ABDELJALIL EL-MOUSSADEK 95 5.5.1 The extended Kalman filter (EKF) The Kalman filter uses data ...