IDEAS home Printed from https://ideas.repec.org/p/zbw/sfb373/199719.html
   My bibliography  Save this paper

A class of Health-Jarrow-Morton models in which the unbiased expectations hypothesis holds

Author

Listed:
  • Riedel, Frank

Abstract

The unbiased expectations hypothesis states that forward rates are unbiased estimates for future short rates. Cox, Ingersoll and Ross [1] conjectured that this hypothesis should be inconsistent with the absence of arbitrage possibilities. Using the framework of Heath, Jarrow and Morton [4] we show that this is not always the case. The unbiased expectations hypothesis together with the existence of an equivalent martingale measure is equivalent to a certain condition on the volatilities of the forward rates.

Suggested Citation

  • Riedel, Frank, 1997. "A class of Health-Jarrow-Morton models in which the unbiased expectations hypothesis holds," SFB 373 Discussion Papers 1997,19, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
    • Handle: RePEc:zbw:sfb373:199719
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/66288/1/728567407.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Robert A. Jarrow, 2009. "The Term Structure of Interest Rates," Annual Review of Financial Economics, Annual Reviews, vol. 1(1), pages 69-96, November.
    2. McCulloch, J Huston, 1993. "A Reexamination of Traditional Hypotheses about the Term Structure: A Comment," Journal of Finance, American Finance Association, vol. 48(2), pages 779-789, June.
    3. David Heath & Robert Jarrow & Andrew Morton, 2008. "Bond Pricing And The Term Structure Of Interest Rates: A New Methodology For Contingent Claims Valuation," World Scientific Book Chapters, in: Financial Derivatives Pricing Selected Works of Robert Jarrow, chapter 13, pages 277-305, World Scientific Publishing Co. Pte. Ltd..
    4. repec:bla:jfinan:v:44:y:1989:i:1:p:205-09 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jarrow, Robert, 2014. "Computing present values: Capital budgeting done correctly," Finance Research Letters, Elsevier, vol. 11(3), pages 183-193.
    2. Johannes W. Fedderke & Neryvia Pillay Bell, 2007. "A Theoretically Defensible Measure of Risk: Using Financial Market Data from a Middle Income Context," Working Papers 064, Economic Research Southern Africa.
    3. Fred Benth & Jukka Lempa, 2014. "Optimal portfolios in commodity futures markets," Finance and Stochastics, Springer, vol. 18(2), pages 407-430, April.
    4. Björk, Tomas & Landén, Camilla & Svensson, Lars, 2002. "Finite dimensional Markovian realizations for stochastic volatility forward rate models," SSE/EFI Working Paper Series in Economics and Finance 498, Stockholm School of Economics, revised 07 May 2002.
    5. Matteo Bonato & Luca Taschini, 2016. "Comovement and the financialization of commodities," GRI Working Papers 215, Grantham Research Institute on Climate Change and the Environment.
    6. Carl Chiarella & Samuel Chege Maina & Christina Nikitopoulos Sklibosios, 2013. "Credit Derivatives Pricing With Stochastic Volatility Models," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 16(04), pages 1-28.
    7. Jean-Philippe Bouchaud & Nicolas Sagna & Rama Cont & Nicole El-Karoui & Marc Potters, 1999. "Phenomenology of the interest rate curve," Applied Mathematical Finance, Taylor & Francis Journals, vol. 6(3), pages 209-232.
    8. Michael J. Fleming & Eli M. Remolona, 1999. "The term structure of announcement effects," Staff Reports 76, Federal Reserve Bank of New York.
    9. Erhan Bayraktar & Li Chen & H. Vincent Poor, 2005. "Consistency Problems for Jump-diffusion Models," Applied Mathematical Finance, Taylor & Francis Journals, vol. 12(2), pages 101-119.
    10. Eric Dubois & Didier Janci, 1994. "Prévision du PIB par la courbe des taux : une constatation empirique en quête de théorie," Économie et Prévision, Programme National Persée, vol. 112(1), pages 69-85.
    11. repec:bla:germec:v:9:y:2008:i::p:207-231 is not listed on IDEAS
    12. Martin Vojtek, 2004. "Calibration of Interest Rate Models - Transition Market Case," CERGE-EI Working Papers wp237, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    13. Jirô Akahori & Hiroki Aoki & Yoshihiko Nagata, 2006. "Generalizations of Ho–Lee’s binomial interest rate model I: from one- to multi-factor," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 13(2), pages 151-179, June.
    14. Stéphane Goutte & Benteng Zou, 2012. "Continuous time regime switching model applied to foreign exchange rate," Working Papers hal-00643900, HAL.
    15. Choong Tze Chua & Dean Foster & Krishna Ramaswamy & Robert Stine, 2008. "A Dynamic Model for the Forward Curve," The Review of Financial Studies, Society for Financial Studies, vol. 21(1), pages 265-310, January.
    16. Radu Tunaru, 2015. "Model Risk in Financial Markets:From Financial Engineering to Risk Management," World Scientific Books, World Scientific Publishing Co. Pte. Ltd., number 9524, August.
    17. Mark Fisher & Christian Gilles, "undated". "Around and Around: The Expectations Hypothesis," Finance and Economics Discussion Series 1996-17, Board of Governors of the Federal Reserve System (U.S.), revised 04 Dec 2019.
    18. Matheus R Grasselli & Tsunehiro Tsujimoto, 2011. "Calibration of Chaotic Models for Interest Rates," Papers 1106.2478, arXiv.org.
    19. Giandomenico, Rossano, 2008. "Valuing Coupon Bond Linked to Variable Interest Rate," MPRA Paper 21974, University Library of Munich, Germany.
    20. Robert Jarrow & Hao Li, 2014. "The impact of quantitative easing on the US term structure of interest rates," Review of Derivatives Research, Springer, vol. 17(3), pages 287-321, October.
    21. Michael B. Giles & Christoph Reisinger, 2012. "Stochastic finite differences and multilevel Monte Carlo for a class of SPDEs in finance," Papers 1204.1442, arXiv.org.

    More about this item

    Keywords

    term structure of interest rates; expectations hypotheses;

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:sfb373:199719. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/sfhubde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.