The diploma thesis deals mostly with interest rate risk issue. It describes the basic methods of interest rate risk measurement with use of analyses executing by Asset Liability Management department in banks. Such analyses as repricing GAP, net interest income analysis, market value of equity and sensitivity analyses to interest rate movements. There is an analysis of Czech crown yield curve as well, in order to deeper insight of its probability behaviour. Results of this analysis are used for advanced techniques in ALM. Especially knowledge of volatilities of particular yield points and theirs relations is used in these methods. There was also a multi equation model for predictions of yield curve development created. One of the variables in the model there is the 2-week repo rate of Czech National Bank included.

I study, develop and implement selected interest rate models. I begin with a simple categorization of interest rate models and with an explanation why interest rate models are useful. I explain and discuss the notion of arbitrage. I use Oldrich Vasicek's seminal model (Vasicek; 1977) to develop the idea of no-arbitrage term structure modeling. I introduce both the partial di erential equation and the risk-neutral approach to zero-coupon bond pricing. I briefly comment on affine term structure models, a general equilibrium term structure model, and HJM framework. I present the Czech Treasury yield curve estimates at a daily frequency from 1999 to the present. I use the parsimonious Nelson-Siegel model (Nelson and Siegel; 1987), for which I suggest a parameter restriction that avoids abrupt changes in parameter estimates and thus allows for the economic interpretation of the model to hold. The Nelson-Siegel model is shown to fit the Czech bond price data well without being over-parameterized. Thus, the model provides an accurate and consistent picture of the Czech Treasury yield curve evolution. The estimated parameters can be used to calculate spot rates and hence par rates, forward rates or discount function for practically any maturity. To my knowledge, consistent time series of spot rates are not available for the Czech economy. I introduce two estimation techniques of the short-rate process. I begin with the maximum likelihood estimator of a square root diff usion. A square root di usion serves as the short rate process in the famous CIR model (Cox, Ingersoll and Ross; 1985b). I develop and analyze two Matlab implementations of the estimation routine and test them on a three-month PRIBOR time series. A square root diff usion is a restricted version of, so called, CKLS di ffusion (Chan, Karolyi, Longsta and Sanders; 1992). I use the CKLS short-rate process to introduce the General Method of Moments as the second estimation technique. I discuss the numerical implementation of this method. I show the importance of the estimator of the GMM weighting matrix and question the famous empirical result about the volatility speci cation of the short-rate process. Finally, I develop a novel yield curve model, which is based on principal component analysis and nonlinear stochastic di erential equations. The model, which is not a no-arbitrage model, can be used in areas, where quantification of interest rate dynamics is needed. Examples, of such areas, are interest rate risk management, or the pro tability and risk evaluation of interest rate contingent claims, or di erent investment strategies. The model is validated by Monte Carlo simulations.

En finance, le risque de modèle est le risque de pertes financières résultant de l'utilisation de modèles. Il s'agit d'un risque complexe à appréhender qui recouvre plusieurs situations très différentes, et tout particulièrement le risque d'estimation (on utilise en général dans un modèle un paramètre estimé) et le risque d'erreur de spécification de modèle (qui consiste à utiliser un modèle inadéquat). Cette thèse s'intéresse d'une part à la quantification du risque de modèle dans la construction de courbes de taux ou de crédit et d'autre part à l'étude de la compatibilité des indices de Sobol avec la théorie des ordres stochastiques. Elle est divisée en trois chapitres. Le Chapitre 1 s'intéresse à l'étude du risque de modèle dans la construction de courbes de taux ou de crédit. Nous analysons en particulier l'incertitude associée à la construction de courbes de taux ou de crédit. Dans ce contexte, nous avons obtenus des bornes de non-arbitrage associées à des courbes de taux ou de défaut implicite parfaitement compatibles avec les cotations des produits de référence associés. Dans le Chapitre 2 de la thèse, nous faisons le lien entre l'analyse de sensibilité globale et la théorie des ordres stochastiques. Nous analysons en particulier comment les indices de Sobol se transforment suite à une augmentation de l'incertitude d'un paramètre au sens de l'ordre stochastique dispersif ou excess wealth. Le Chapitre 3 de la thèse s'intéresse à l'indice de contraste quantile. Nous faisons d'une part le lien entre cet indice et la mesure de risque CTE puis nous analysons, d'autre part, dans quelles mesures une augmentation de l'incertitude d'un paramètre au sens de l'ordre stochastique dispersif ou excess wealth entraine une augmentation de l'indice de contraste quantile. Nous proposons enfin une méthode d'estimation de cet indice. Nous montrons, sous des hypothèses adéquates, que l'estimateur que nous proposons est consistant et asymptotiquement normal / In finance, model risk is the risk of loss resulting from using models. It is a complex risk which recover many different situations, and especially estimation risk and risk of model misspecification. This thesis focuses: on model risk inherent in yield and credit curve construction methods and the analysis of the consistency of Sobol indices with respect to stochastic ordering of model parameters. it is divided into three chapters. Chapter 1 focuses on model risk embedded in yield and credit curve construction methods. We analyse in particular the uncertainty associated to the construction of yield curves or credit curves. In this context, we derive arbitrage-free bounds for discount factor and survival probability at the most liquid maturities. In Chapter 2 of this thesis, we quantify the impact of parameter risk through global sensitivity analysis and stochastic orders theory. We analyse in particular how Sobol indices are transformed further to an increase of parameter uncertainty with respect to the dispersive or excess wealth orders. Chapter 3 of the thesis focuses on contrast quantile index. We link this latter with the risk measure CTE and then we analyse on the other side, in which circumstances an increase of a parameter uncertainty in the sense of dispersive or excess wealth orders implies and increase of contrast quantile index. We propose finally an estimation procedure for this index. We prove under some conditions that our estimator is consistent and asymptotically normal

This doctoral thesis is a collection of four papers on the analysis of the term structure of interest rates with a focus at the intersection of macroeconomics and finance. "Risk in Macroeconomic Fundamentals and Bond Return Predictability" documents that factors related to risks underlying the macroeconomy such as expectations, uncertainty and downside (upside) macroeconomic risks are able to explain variation in bond risk premia. The information provided is found to be, to a large extent, unrelated to that contained in forward rates and current macroeconomic conditions. "Out-of-sample bond excess returns predictability" provides evidence that macroeconomic variables, risks in macroeconomic outcomes as well as the combination of these different sources of information are able to generate statistical as well as economic bond excess returns predictability in an out-of-sample setting. Results suggest that this finding is not driven by revisions in macroeconomic data. The term spread (yield curve slope) is largely used as an indicator of future economic activity. "Re-examining the predictive power of the yield curve with quantile regression" provides new evidence on the predictive ability of the term spread by studying the whole conditional distribution of GDP growth. "Modeling and forecasting the yield curve by extended Nelson-Siegel class of models: a quantile regression approach" deals with yield curve prediction. More flexible Nelson-Siegel models are found to provide better fitting to the data, even when penalizing for additional model complexity. For the forecasting exercise, quantile-based models are found to overcome all competitors. / <p>Diss. Stockholm :  Stockholm School of Economics, 2014. Introduction together with 4 papers.</p>

Submitted by Uirá Caiado de Castro (ucaiado@yahoo.com.br) on 2017-08-28T20:17:54Z No. of bitstreams: 1 uira_caiado_tradingRL.pdf: 1000833 bytes, checksum: d530c31d30ddfd98e5978aaaf3170959 (MD5) / Approved for entry into archive by Joana Martorini (joana.martorini@fgv.br) on 2017-08-28T21:06:42Z (GMT) No. of bitstreams: 1 uira_caiado_tradingRL.pdf: 1000833 bytes, checksum: d530c31d30ddfd98e5978aaaf3170959 (MD5) / Made available in DSpace on 2017-08-29T12:42:53Z (GMT). No. of bitstreams: 1 uira_caiado_tradingRL.pdf: 1000833 bytes, checksum: d530c31d30ddfd98e5978aaaf3170959 (MD5) Previous issue date: 2017-08-24 / O presente estudo propõe o uso de um modelo de aprendizagem por reforço para derivar uma estratégia de trading em taxa de juros diretamente de dados históricos de alta frequência do livro de ofertas. Nenhuma suposição sobre a dinâmica do mercado é feita, porém é necessário criar um simulador com o qual o agente de aprendizagem possa interagir para adquirir experiência. Diferentes variáveis relacionadas a microestrutura do mercado são testadas para compor o estado do ambiente. Funções baseadas em P&L e/ou na coerência do posicionamento das ofertas do agente são testadas para avaliar as ações tomadas. Os resultados deste trabalho sugerem algum sucesso na utilização das técnicas propostas quando aplicadas à atividade de trading. Porém, conclui-se que a obtenção de estratégias consistentemente lucrativas dependem muito das restrições colocadas na aprendizagem. / The present study proposes the use of a reinforcement learning model to develop an interest rate trading strategy directly from historical high-frequency order book data. No assumption about market dynamics is made, but it requires creating a simulator wherewith the learning agent can interact to gain experience. Different variables related to the microstructure of the market are tested to compose the state of the environment. Functions based on P&L and/or consistency in the order placement by the agent are tested to evaluate the actions taken. The results suggest some success in bringing the proposed techniques to trading. However, it is presumed that the achievement of consistently profitable strategies is highly dependent on the constraints placed on the learning task.

Submitted by Ulisses Nehmi (ulisses@nehmi.com.br) on 2017-12-22T17:42:27Z No. of bitstreams: 1 Dissert_MPE_Ulisses_2017.12.pdf: 2808696 bytes, checksum: fe4dbd86f710e7d09cbb1705853aba42 (MD5) / Approved for entry into archive by Thais Oliveira (thais.oliveira@fgv.br) on 2017-12-22T17:51:45Z (GMT) No. of bitstreams: 1 Dissert_MPE_Ulisses_2017.12.pdf: 2808696 bytes, checksum: fe4dbd86f710e7d09cbb1705853aba42 (MD5) / Made available in DSpace on 2017-12-23T15:56:54Z (GMT). No. of bitstreams: 1 Dissert_MPE_Ulisses_2017.12.pdf: 2808696 bytes, checksum: fe4dbd86f710e7d09cbb1705853aba42 (MD5) Previous issue date: 2017-12-15 / Muitos estudos sobre a Estrutura a Termo das Taxas de Juros (ETTJ) focam na análise de um único país, geralmente uma economia desenvolvida. São raros os estudos que avaliam as características das curvas de juros para um conjunto de países desenvolvidos, e ainda mais raros os estudos que avaliam essas características para países emergentes. Este estudo parametrizou a ETTJ de 19 economias por um período de 10 anos, divididas entre economias desenvolvidas e emergentes, identificando as principais características que definem cada grupo, algumas das quais se revelaram contraintuitivas. A parametrização das curvas de juros também foi utilizada para remover o ruído dos dados originais, o que permitiu uma análise mais precisa dos fatores que explicam suas variâncias. Com isso, foram encontradas evidências de diferenças relevantes no peso dos fatores nível, inclinação e curvatura na explicação das variações na ETTJ para os países desenvolvidos em relação aos países emergentes. / Many studies on Term Structure of Interest Rates (TSIR) focus on the analysis of a single country, usually a developed economy. Seldom do studies evaluate the features of yield curves for a set of developed countries, and even more rarely do studies evaluate these features for emerging countries. The present study evaluates the parametric TSIR of 19 economies over a period of 10 years, grouped into two distinct sets: developed and emerging economies. It identifies the main features, some of which have proved counterintuitive, that define each group. The parameterization of the yield curves was also used to removed noise from the original data, which allowed for a more accurate analysis of the factors that explain its variances. Evidence of relevant differences in weights for the level, slope and curvature factors were found, which explain the variations in the TSIR of developed countries relative to emerging countries.

The implementation of International Accounting Standard 32 Financial Instruments: Disclosure and Presentation (lAS 32), International Accounting Standard 39 Financial Instruments: Recognition and Measurement (lAS 39) and International Financial Reporting Standard 7 Financial Instruments: Disclosures (IFRS 7) by developing countries has been met with mixed reactions largely due to the extensive use of the fair value concept by the three accounting standards. The use of the fair value concept in developing countries has proved to be a significant challenge due to either a Jack of formal capital market systems or very thinly traded capital markets. This study investigates the obstacles to determining fair values of equity share investments, government bonds and corporate bonds, treasury bills and loan advances in Mozambique. The study was done through a combination of literature review and empirical research using a questionnaire. The trading statistics of the financial instruments on the Mozambique Stock Exchange and the prospectuses of bonds were used. The empirical research was carried out using a type of non-probability sampling technique called purposive sampling. A subcategory of purposive sampling called expert sampling was used to select the eventual sample which was composed of people with specialised knowledge on the capital market system in Mozambique. The results of the empirical research were analysed using pie charts to summarise the responses. The research concluded that the Mozambique Stock Exchange is an inactive market for financial instruments characterised by thin trading in both equity shares and bonds. The estimation of fair values evidenced by observable market transactions is therefore impossible. The absence of credit rating agencies in Mozambique presents a significant challenge in assigning credit risk and pricing financial instruments such as bonds. The research also noted that significant volatility of the main economic indicators such as treasury bills interest rates and inflation made it difficult to determine fair values of financial instruments using financial modelling techniques. Due to the above obstacles to determining fair values of certain financial instruments in Mozambique, the best alternatives are to value these financial instruments at either cost or amortised cost. / Financial Accounting / M. Com. (Accounting)

Made available in DSpace on 2016-06-02T20:06:07Z (GMT). No. of bitstreams: 1 5090.pdf: 2622386 bytes, checksum: efb13371116d8185c23b86079eb4237c (MD5) Previous issue date: 2013-03-21 / Financiadora de Estudos e Projetos / The present paper studies the yield curve, an important tool for financial decisions, due to its fundamental role in the implementation and evaluation of monetary policies by the central banks. It also shows market perspectives in relation to the future development of interest rates, inflation and economical activities. Using an adequate model and a reasoned assessment of its parameters enables us to adjust the curve as far as possible to the real curve and hence obtain most precise and trustful results. These results were acquired by studying a model which was developed in 1987 by Nelson and Siegel and used to draw up the yield curve. Considering the model s limitations, diferent methods were used to attain the estimated parameters, such as Ordinary Least Squares, Maximum Likelihood and Bayesian Inference in the static version. The Nelson-Siegel model is widely used in Brazil and in the rest of the world, due to its economical idea, easy implementation and eficient adjustment into diferent formats that the yield curve is able to deal with. By considering the restrictions of the model, we found estimations for the parameters of the model safer than other and besides, the main point of this work is an estimation form of parameters of time together with others parameters of the model without considering one fixed value for it. / O objeto de estudo deste trabalho é a curva de taxas de juros, uma importante ferramenta utilizada em decisões financeiras, pois desempenha um papel fundamental na implementação e avaliação de políticas monetárias pelos bancos centrais. Assim sendo, indica as expectativas do mercado quanto ao comportamento futuro das taxas de juros, inflação e atividade econômica. A utilização de um bom modelo e uma boa estimação dos parâmetros do mesmo nos permite representar a curva ajustada o mais próximo da curva real, dessa forma, conseguimos encontrar resultados mais precisos e confiáveis. Neste trabalho estudamos o modelo utilizado para construção das curvas de taxas de juros desenvolvido em 1987 por Nelson e Siegel (1987) e métodos, considerando as restrições do modelo, para obtermos as estimativas dos parâmetros (Mínimos Quadrados Ordinários, Máxima Verossimilhança e Inferência Bayesiana) na vers~ao estática. O modelo de Nelson e Siegel apresenta grande aplicação tanto no Brasil quanto no restante do mundo, pois ele apresenta como características seu caráter parcimonioso nos parâmetros, sua fácil implementação e ajuste eficiente nos diversos formatos que a curva de taxas de juros pode assumir. Por considerarmos as restrições do modelo, encontramos estimativas para os parâmetros do modelo mais seguras e além disso, como principal contribuição deste trabalho, temos uma forma de estimação do parâmetro de tempo conjuntamente com os demais parâmetros do modelo, sem considerar apenas um valor fixo para ele.

This paper estimates the zero coupon yield curve for the Peruvian government bond market. We employ two methods of estimation proposed by Nelson y Siegel (1987) and Svensson (1994). Model performance is evaluated based on criteria of goodness of fit, flexibility and parameter stability, by using alternative objective functions for parameter estimation. The Svensson model shows on average a better adjustment; however, parameter estimates are more unstable when data availability is limited —for example when there is a small number of transactions in the secondary market— in which case is better to use the Nelson y Siegel estimates. At the end of the paper, yield curve estimates are used to derive market expectations of future short term interest rates, that are valuable sources of information for central bank’s monetary policy. / En el presente documento se estiman dos modelos para la curva de rendimiento en soles para el Perú, el modelo de Nelson y Siegel (1987) y el modelo de Svensson (1994). Se compara el desempeño de ambos modelos en términos de ajuste, flexibilidad y estabilidad de sus parámetros, y se evalúan funciones objetivo de estimación alternativas. El modelo de Svensson tiene el mejor ajuste, sin embargo, es más inestable cuando no se dispone de datos suficientes para los diferentes plazos de la curva de rendimiento —por la ausencia de emisiones o de precios cuando la negociación en el mercado secundario es incipiente— en cuyo caso es preferible el uso del modelo de Nelson y Siegel. En la parte final se muestra el uso de las curvas de rendimiento cupón cero estimadas como fuente de información de los bancos centrales sobre las expectativas del mercado para la evolución futura de la tasa interbancaria.

This diploma thesis focuses on the issue of the Central European bond market and the analysis of state securities of the Vysegrad Region. The first chapter describes the state bond and its typical features. The second chapter is devoted to two specific forms of a bond, namely an inflated bond and a zero-coupon bond. This part is not only theoretical, but is also practically focused on the analysis of these less widely used forms of bonds. The third chapter discusses the knowledge gained in the theoretical portion, through the comparison of government bonds and the empirical yield curve. The second half is focused on the comparison of sovereign bond trades and rating developments in the countries concerned.