Thursday 12 October 2017, 1.00PM to 2.00pm
Speaker(s): Peter Spencer (York)
Abstract: This paper develops a shadow rate Gaussian term structure model (SRGTSM) of the Eurodollar futures and Treasury bond markets to study the effects of credit shocks and monetary policy at the lower bound. This research was initially motivated by the observation that the shadow rate model gives a relatively simple closed form for a futures price. In contrast, tractable formulae for bond yields and forward rates are only available as approximations. In addition, the use of data for Eurodollar and Treasury markets allows us to study the links between these markets and distinguish between credit and policy shocks, yielding new insights into the effect of the recent financial crisis.
Location: A/EC202 Economics Staff Room
Admission: Staff and PhD Students