Thesis (MSc)--Stellenbosch University, 2012. / ENGLISH ABSTRACT: The interest rates market has changed dramatically since the 2007 credit crunch with the explosion of basis spreads between rates of different tenors and currencies. Consequently, the classical replication of FRA rates with spot LIBOR rates is no longer valid. Moreover, the 2007 credit crunch yields a separation between the curve used for discounting and the forward or projection curves that estimate all future cash-fl ows. Another impact of the credit crunch in risk management is that market participants have started to give more importance to the difference between collateralized and uncollateralized trades. Nowadays, the wide spread use of collateral, especially in swap contracts, has made the overnight index swap (OIS) rate the appropriate benchmark for discounting collateralized trades. Inspired by the seminal works of Mercurio (2010a,b), Kijima et al. (2008), Fujii et al. (2011), Bianchetti (2010b), with the contributions of other authors, and motivated by the evolution of the interest rates market and models, this thesis examines a new framework that uses multiple-curves to value interest rate derivatives which is compatible with the current market practice. Firstly, we discuss the roots of the 2007 credit crunch and its serious consequences for pricing interest rate derivatives. We underscore the necessity of a multiple-curve pricing framework for interest rate derivatives. This is followed by a discussion on the importance of collateralization and OIS discounting in pricing Over-The-Counter (OTC) derivatives. The central part of the thesis discusses the modern theoretical framework and the practical implementation of the multiple curve pricing method. We present a bootstrapping algorithm used to construct and fit the multiple-yield curves to market prices of plainvanilla contracts. Secondly, starting with the single-currency economy, the extended version of the LIBOR Market Model, developed by Mercurio (2010a,b), which proposes a joint model of FRA rates, implied forward rates and their corresponding spread is investigated. Analogously, the extended version of short-rate model in a multiple-curve setup and in the presence of basis spread, proposed by Kijima et al. (2008), is presented and discussed. This work provides a detailed analysis of these extensions and the corresponding closed formulae for liquid products such as caps and swaptions. Finally, in the multiple-currencies case, the HJM model with stochastic basis spreads, introduced by Fujii et al. (2011), consistent with the foreign exchange and cross-currency swaps markets that includes the effect of collateralization is examined thoroughly. / AFRIKAANSE OPSOMMING: Die rentekoers mark het dramaties verander sedert die 2007 krediet krisis met 'n ontplo ng van basisverspreidings tussen koerse van verskillende looptye ("tenor") en geldeenhede. As gevolg, is die klassieke replikasie van FRA koerse met LIBOR sigkoerse nie langer geldig nie. Verder het die 2007 kredietkrisis 'n skeiding veroorsaak tussen die kromme wat gebruik word vir diskontering en die voorwaardse of vooruitskattings krommes wat toekomstige kontantvloei voorspel. 'n Verdere impak van die kredietkrisis in risikobestuur is dat mark deelnemers begin het om meer klem te lê op verskille tussen aangevulde en onaangevulde handel. Deesdae, met die algemene gebruik van kollaterale sekuriteit, veral in ruiltransaksiekontrakte, is die oornagse indeks ruiltransaksie (overnight index swap, OIS) koers die geskikte maatstaf om aangevulde handel te diskonteer. Geïnspireer deur die gedagteryke werk van Mercurio (2010a,b), Kijima et al. (2008), Fujii et al. (2011), Bianchetti (2010b), met bydrae van menige outeurs, en gemotiveer deur die evolusie van die rentekoers markte en modelle, ondersoek hierdie tesis 'n nuwe raamwerk wat multikrommes gebruik om rentekoers afgeleide effekte te waardeer wat versoenbaar is met die lopende mark praktyk. Eerstens, bespreek ons die oorsake van die 2007 kredietkrisis en die ernstige nagevolge vir die waardering van rentekoers afgeleide effekte. Ons beklemtoon die noodsaaklikheid van 'n multikromme waarderings raamwerk vir rentekoers afgeleide effekte. Dit word gevolg deur 'n bespreking oor die belangrikheid van aanvulling en OIS diskontering in die waardering van oor-die-toonbank (over-the-counter, OTC) effekte. Die teoretiese raamwerk en die praktiese implimentering van die multikromme waarderings metode word bespreek. Ons stel ook ten toon 'n skoenlus ("bootstrapping") algoritme wat gebruik kan word om meervoudige opbrengs krommes saam te stel en die dan te pas op mark pryse van vanielje kontrakte. Tweedens, met 'n enkel geldeenheid ekonomie as beginpunt, word die uitgebreide weergawe van die LIBOR Mark Model (ontwikkel deur Mercurio (2010a,b), wat 'n gesamentlike model van FRA koerse voorstel), geïmpliseerde termyn koerse en hul ooreenstemmende verspreiding bestudeer. Ooreenkomstig word die uitgebreide weergawe van die kort koers model in 'n multikromme opset en in die aanwesigheid van basisspreiding (voorgestel deur Kijima et al. (2008)) uiteengesit en bespreek. Hierdie werk verskaf 'n uitvoerige analise van hierdie uitbreidings en die ooreenstemmende geslote formules vir vloeibare produkte soos perke en ruiltransaksie opsies. Ten slotte, in die multi-geldeenheid geval, word die HJM model met stogastiese basisverspreiding (voorgestel deur Fujii et al. (2011)), nie-strydig met buitelandse valuta en kruisvaluta ruiltransaksie markte wat die effekte van aanvulling insluit word deuglik bestudeer.

This study addressed two issues. First, it examined the ability of two models, developed by Cox, Ingersoll and Ross (CIR), to explain the differences between futures and implicit forward prices in the thirteen-week T-bill market. The models imply that if future interest rates are stochastic, futures and forward prices differ; the structural difference is due to the daily settlement process required in futures trading. Second, the study determined the efficiency of the thirteen-week T-bill futures market using volatility and regression tests. Volatility tests use variance bounds to examine whether futures prices are excessively volatile for the market to be efficient. Regression tests investigate whether futures prices are unbiased predictors of future spot prices. The study was limited to analysis of the first three futures contracts, using weekly price data as reported in the Wall Street Journal from March, 1976 to December, 1984. Testing of the first CIR model involved determination of whether changes in futures-forward price differences are related to changes in local covariances between T-bill futures and bond prices. The same procedure applied in testing the second model with respect to changes in futures-forward price differences, local covariances between T-bill spot and bond prices, and local variances of bond prices. Volatility tests of market efficiency involved comparison of mean variances on both sides of two inequality equations. Regression tests involved determination of whether slope coefficients are significantly different from zero.

A research report submitted to the Faculty of Management, University of the Witwatersrand, in partial fulfilment of the requirements for the degree of Master of Management (in the field of Public and Development Management). / Many debates have been waged about the effect of the interest rate ceilings on the provision of financial services to small businesses. It has been considered as one of the major constraints in small business access to capital and it is also considered a major inhibitor of small business development. The present study attempted to determine whether interest rate ceilings should be undertaken or not, and how in a South African socio-political context this would help small business development. Concomitantly, it was considered how the interest rates affect small businesses according different purposes, size and terms of loans. A case study method was used to pursue this research. The case study of Mamelodi Township (Pretoria) and Kildare/Jonkllanqa village (Mhala District - Northern Province) were undertaken. Open-ended interviews with borrowers and financial institutions (providers) were conducted. The result of the interviews was analysed and reinforced with an analysis of national and international secondary literature. One of the main findings of the research was that interest rates ceiling are necessary and substantial in helping small business development. It was established that interest rate ceilings have to be considered in a flexible manner, accordlng specific conditions of small business activity. It was also concluded that interest rate ceilings have to be a consequence of a regulatory framework which enables small business access to capital, and, thus, development of their local community. The result of the research likewise, has indicated that for small, short term, working capital loans, the impact of interest rates on borrowers is smaller than for larger, longer term borrowers. The effect of the circulation of resources in a community in the case of a lower level interest rates deserves more investigation but there are primary indications of some positive impact on. / Andrew Chakane 2019

"This project is an investigation and implementation of pricing derivative securities using the forward measure. It will explain the methodology of building a modified discrete Ho-Lee interest rate model to do so, along with the extraction of historical yield and interest rates to calibrate the model. "

Research Report: BUSA7167 (MM Finance and Investment Management). Submitted in Partial Fulfillment of the Requirements for the (Master of Management in Finance and Investments). Submitted on 06th June 2016 / The findings of the research have implications on the efficiency of the South African exchange rate market, and by extension, the efficiency of similar emerging foreign exchange markets. The study used Ordinary Least Square Approach and Johansen cointegration. Despite their theoretical appeal, and in line with a dozen of related past literature, the findings of the research generally favour the rejection UIP, PPP and IFE. The findings have implications on some regulatory measures that can be undertaken by the financial authority to improve the efficiency of the foreign exchange market. While there have been extensive studies on uncovered interest parity (UIP), purchasing power parity(PPP), and the international Fisher effect(IFE), research has scarcely tested these hypotheses in the context of emerging markets. This study attempts to bridge the existing gap by testing the three related parity condition for South Africa. / MT2016

[pt] Nessa dissertação um novo método para previsão da Estrutura a Termo da Taxa de Juros Brasileira - ETTJ brasileira - conhecido como Máquina de Suporte Vetorial para Regressão é investigado, comparando-o com os métodos tradicionais, tais como modelos VAR (Vetor Auto- regressivo) e ECM (Modelos de Correção de Erros). Utiliza-se além dos retornos de títulos de renda fixa, algumas variáveis macro-econômicas, que conforme sugerido no artigo de Evans e Marshall (1998) e verificado para economia brasileira no artigo de Fukuda, Vereda e Lopes (2006) melhoram a previsão dos retornos de títulos de renda fixa no longo prazo. O experimento mostra uma melhora considerável do SVR sobre os modelos tradicionais mencionados no longo prazo, atuando ainda como ótimo indicador da direção das taxas em praticamente todos os horizontes de previsão. Para tal avaliação, foram utilizados os critérios de raiz do erro quadrado médio, erro absoluto médio, simetria direcional e simetria direcional ponderada, correta tendência para cima e correta tendência para baixo além do teste U de Theil, que faz uso da raiz do erro quadrado médio para verificar se ocorre uma melhora significativa de um modelo sobre outro. Uma vez que não existe uma maneira estruturada para escolha dos parâmetros livres do SVR, a escolha dos mesmos foi feita através de uma função do software R, que faz uma pesquisa em um domínio retangular fornecido pelo usuário. A análise dos resultados mostra que SVR é uma técnica promissora para previsão dos retornos de títulos de renda fixa, sugerindo-se ainda melhorar as escolhas dos parâmetros livres do SVR uma vez que os mesmos são meios poderosos de regularização e adaptação do ruído aos dados. / [en] In this dissertation a new method for the prediction of the Brazilian Term Structure of Interest Rates - Brazilian ETTJ - known as Support Vector Regression is investigated. This is compared with the traditional methods used in this set up, such as VAR models (Vector Autoregressive) and ECM (Error Correction Models). Besides the interest rates, some macroeconomic variables are also used, as it was suggested in a work from Evans and Marshall(1998) and verified for brazilian economy in a work from Fukuda, Vereda and Lopes (2006), the inclusion of macroeconomic variables can improve the prediction of the interest rates in long term forecasts. The experiment show some improvements in using SVR in the long term in relation to the traditional methods mentioned, acting like a realy good predictor of the direction of the interest rates along the short and long term forecasts. To make these assertions, we make use of some tests like the root mean squared error, mean absolute error, directional symmetry and weighted directional symmetry, Correct Up trend and Corret Down trend besides Theil U test, which uses the root mean squared error to verify if there is some significant improvement between two models. As there is not a structured way to choose the free parameters of SVR, a function in the R software was used in order to make a grid search over a supplied parameter ranges. The analysis of the results demonstrate that SVR is a promising technique to prediction of interest rates, suggestions are also made in order to get better the choices of the free SVR parameters once they are powerful means of regularization and adaptation to the noise in the data.

O crédito rural desempenhou um relevante papel no desenvolvimento da agricultura brasileira. Apesar disso, a evolução histórica do montante de recursos oficiais destinados aos agricultores mostrou forte decréscimo a partir do final dos anos 70. Uma das causas desta redução foi a presença de subsídio nesta modalidade de financiamento, de forma insustentável diante das restrições da economia brasileira. A literatura apresenta este volume elevado de subsídio como tendo sido buscado intencionalmente pela política em vigor na época. O presente trabalho busca verificar se houve uma política explícita de subsídio via taxa de juros preferenciais ou se, ex-post, ele ocorreu em excesso. A principal indicativa do estudo é a de que o subsídio seria resultado da aceleração não prevista do processo inflacionário no Brasil durante a segunda metade do século passado. A análise deste problema permitirá estudos sobre a política de crédito rural sob uma perspectiva diferente daquela predominante na literatura. Nesta nova perspectiva, os subsídios em excesso seriam, ao menos em parte, resultado da imprevisibilidade e instabilidade do cenário macroeconômico e não um fim claramente buscado pela política de crédito rural no Brasil. Os resultados verificados neste estudo ressaltam esta indicativa de política de crédito subsidiada em decorrência do processo inflacionário não previsto pelas expectativas inflacionárias. As expectativas inflacionárias mostraram-se inferiores em grande parte do período analisado, o que ocasiona uma taxa de juros real inferior a esperada. Pode-se concluir que o programa de crédito rural foi excessivamente subsidiado em virtude do descontrole inflacionário do país. / Rural credit played a relevant role in the development of Brazilian agriculture. However, the historical evolution of the amount of official resources aimed at farmers showed a sharp decrease since the late 1970s. One of the reasons for this reduction was the subside in this type of credit, which became unsustainable before the restrictions of the Brazilian economy. Literature shows that this high subside volume was intentionally provoked by the policy enforced at the time. This work has the objective of verifying whether there was an explicit subside policy via referential interest rates, or it was overpaid ex post. The main indicative of the study is that the overpaid subside is the result of the unpredicted acceleration of the inflationary process in Brazil during the second half of the last century. The analysis of this problem will make it possible for other studies about the rural credit policy to be carried out from a different perspective than the one predominating in literature. In this new perspective, subsides would be at least partly the result of unpredictability and instability of the macroeconomic scenario and not a solution clearly determined by the rural credit policy in Brazil. The results found in this study led to this indicative of subsidized credit policy due to the inflationary process not foreseen by inflation forecasts. Inflation forecasts were lower in most of the analyzed period, provoking a lower interest rate than the one expected. We conclude that the rural credit program was overpaid subsidized due to the uncontrolled inflation in the country.

Zhang Haiyan. / Thesis (M.Phil.)--Chinese University of Hong Kong, 2001. / Includes bibliographical references (leaves 48-50). / Abstracts in English and Chinese. / Chapter 1 --- Introduction --- p.1 / Chapter 2 --- Literature Review --- p.6 / Chapter 2.1 --- An Introduction to the Uncovered Interest Parity (UIP) and previous works on UIP --- p.6 / Chapter 2.2 --- Previous empirical works applying Band Spectrum Regression(BSR) --- p.15 / Chapter 3 --- Basic Band Spectral Regression (BSR) Techniques --- p.20 / Chapter 3.1 --- BSR Based on the complex Fourier transform --- p.20 / Chapter 3.2 --- BSR based on the real-valued Fourier transform --- p.24 / Chapter 3.3 --- Testing for parameter stability in the frequency domain --- p.26 / Chapter 4 --- Data and Standard Time Series Analysis in the Time Domain --- p.29 / Chapter 5 --- Analyze the UIP relation in the frequency domain --- p.33 / Chapter 5.1 --- An overview of the UIP relation across frequency --- p.33 / Chapter 5.2 --- Testing parameter stability across different time horizons --- p.37 / Chapter 6 --- Test of UIP with the forward premium --- p.42 / Chapter 7 --- Conclusion --- p.45

The purpose of this thesis is to examine the nonlinear relationships between financial (and economic) variables within the field of financial econometrics. The thesis comprises two reviews of literatures, one on nonlinear time series models andthe other one on term structure of interest rates, and four empirical essays on financialapplications using nonlinear modelling techniques. The first empirical essay compares different model specifications of a Markov switching CIR model on the term structure of UK interest rates. We find the least restricted model provides the best in-sample estimation results. Although models with restrictive specifications may provide slightly better out-of-sample forecasts in directional movements of the yields, the economic gains seem to be small. In the second essay, we jointly model the nominal and real term structure of the UK interest rates using a three-factor essentially affine no-arbitrage term structure model. The model-implied expected inflation rates are then used in the subsequent analysis on its nonlinear relationship with the FTSE 100 index return premiums, utilizing a smooth transition vector autoregressive model. We find the model implied expected inflation rates remain below the actual inflation rates after the independence of the Bank of England in 1997, and the recent sharp decline of the expected inflation rates may lend support to the standing ground of the central bank for keeping interest rates low. The nonlinearity test on the relationship between the FTSE 100 index return premiums and the expected inflation rates shows that there exists a nonlinear adjustment on the impact from lagged expected inflation rates to current return premiums. The third essay provides us additional insight into the nature of the aggregate stock market volatilities and its relationship to the expected returns, in a Markov switching model framework, using centuries-long aggregate stock market data from six countries (Australia, Canada, Sweden, Switzerland, UK and US). We find that the Markov switching model assuming both regime dependent mean and volatility with a 3-regime specification is capable to captures the extreme movements of the stock market which are short-lived. The volatility feedback effect that we studied on each of these six countries shows a positive sign on anticipating a high volatility regime of the current trading month. The investigation on the coherence in regimes over time for the six countries shows different results for different pairs of countries. In the last essay, we decompose the term premium of the North American CDX investment grade index into a permanent and a stationary component using a Markov switching unobserved component model. We explain the evolution of the two components in relating them to monetary policy and stock market variables. We establish that the inversion of the CDX index term premium is induced by sudden changes in the unobserved stationary component, which represents the evolution of the fundamentals underpinning the risk neutral probability of default in the economy. We find strong evidence that the unprecedented monetary policy response from the Fed during the crisis period was effective in reducing market uncertainty and helped to steepen the term structure of the CDX index, thereby mitigating systemic risk concerns. The impact of stock market volatility on flattening the term premium was substantially more robust in the crisis period. We also show that equity returns make a significant contribution to the CDX term premium over the entire sample period.

Wang Chongying. / Thesis (M.Phil.)--Chinese University of Hong Kong, 2004. / Includes bibliographical references (leaves 66-69). / Abstracts in English and Chinese. / Chapter I. --- Endogenous Time Preference and Non-neutrality of Money --- p.1 / Chapter 1 --- Introduction --- p.2 / Chapter 2 --- The Model --- p.5 / Chapter 3 --- Non-neutrality of Money --- p.9 / Chapter 4 --- Equilibrium Dynamics --- p.13 / Chapter 5 --- Conclusion --- p.16 / Chapter II. --- Endogenous Time Preference and Interest Rate Feedback Rules --- p.18 / Chapter 1 --- Introduction --- p.19 / Chapter 2 --- Endowment Economy --- p.21 / Chapter 2.1 --- The Model --- p.21 / Chapter 2.2 --- Equilibrium Dynamics --- p.25 / Chapter 3 --- Extended Model with Capital --- p.28 / Chapter 3.1 --- The Model --- p.28 / Chapter 3.2 --- Equilibrium Dynamics --- p.32 / Chapter 4 --- Conclusion --- p.34 / Chapter III. --- Interest Rate Rules and Indeterminacy in a Discrete-Time Monetary Model --- p.37 / Chapter 1 --- Introduction --- p.38 / Chapter 2 --- The Model --- p.39 / Chapter 3 --- Equilibrium Dynamics --- p.42 / Chapter 4 --- Conclusion --- p.45 / Chapter IV. --- Backward-Looking Interest Rate Feedback Rules --- p.48 / Chapter 1 --- Introduction --- p.49 / Chapter 2 --- The Model --- p.51 / Chapter 3 --- Equilibrium Dynamics --- p.57 / Chapter 4 --- Conclusion --- p.61 / Chapter V. --- Appendix --- p.63 / Chapter VI. --- References --- p.66