From structural assumptions to a link between assets and interest rates
Please always quote using this URN:urn:nbn:de:0296-matheon-1462
- We derive a link between the short rate and a new index constructed in a multiasset economy. This uses two structural assumptions: The volatility structure of the assets is rigidly spherical , and the short rate function is homogeneous of degree 0. We give clear motivations for the assumptions, and our main result is economically intuitive and testable from observed data. A preliminary empirical study illustrates how one can test such results.
Author: | Oliver Reiss, John Schoenmakers, Martin Schweizer |
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URN: | urn:nbn:de:0296-matheon-1462 |
Referee: | Anton Bovier |
Document Type: | Preprint, Research Center Matheon |
Language: | English |
Date of first Publication: | 2004/09/06 |
Release Date: | 2004/07/06 |
Preprint Number: | 136 |