This thesis is concerned with a brief summary of the theory of Pade approximants and one of its applications to Finance. Proofs of most of the theorems are omitted and many developments could not be mentioned due to the vastness of the field of Pade approximations. We provide reference to research papers and books that contain exhaustive treatment of the subject. This thesis is mainly divided into two parts. In the first part we derive a general expression of the Pade approximants and some of the results that will be related to the work on the second part of the thesis. The Aitken's method for quick convergence of series is highlighted as Pade[L/1] . We explore the criteria for convergence of a series approximated by Pade approximants and obtain its relationship to numerical analysis with the help of the Crank-Nicholson method. The second part shows how Pade approximants can be a smooth method to model the term structure of interest rates using stochastic processes and the no arbitrage argument. Pade approximants have been considered by physicists to be appropriate for approximating large classes of functions. This fact is used here to compare Pade approximants with very low indices and two parameters to interest rates variations provided by the Federal Reserve System in the United States.

With the discontinuation of Interbank Offered Rates(IBOR), traders found some al-ternative reference rates to replace IBOR. Backward-looking rates are widely accepted new benchmark interest rates. In this thesis, we introduce and subsequently proceed to explore backward-looking rate model and continue doing some re-valuation of interest rate instruments under the backward-looking rates framework.

No description available.

No description available.

No description available.

by Kwan Wai Kwong. / Thesis (M.Phil.)--Chinese University of Hong Kong, 1997. / Includes bibliographical references (leaves 89-92). / ABSTRACT --- p.1 / Chapter 1. --- INTRODUCTION --- p.2 / Chapter 2. --- LITERATURE REVIEW --- p.5 / Chapter 2.1 --- Traditional and Working's hedging theory --- p.5 / Chapter 2.2 --- Portfolio theory and hedging --- p.5 / Chapter 2.3 --- Selection of proper statistical estimation model --- p.7 / Chapter 2.4 --- StaTIonarIty of optimal hedge ratio --- p.8 / Chapter 2.5 --- time-varying hedging models --- p.9 / Chapter 3. --- MARKETS AND INSTRUMENTS --- p.13 / Chapter 3.1 --- Exchange Fund Bills --- p.13 / Chapter 3.1.1 --- Rationale --- p.13 / Chapter 3.1.2 --- Status and deployment of funds --- p.14 / Chapter 3.1.3 --- Form of Bills --- p.14 / Chapter 3.1.4 --- Pricing of the Bills --- p.15 / Chapter 3.1.5 --- Development of the secondary market --- p.15 / Chapter 3.1.6 --- Investors --- p.17 / Chapter 3.1.7 --- Reasons for the success of the Bills programme --- p.17 / Chapter 3.2 --- eurodollar futures contract --- p.18 / Chapter 3.3 --- Treasury bill futures contract --- p.19 / Chapter 3.4 --- Comparison between eurodollar and treasury bills futures --- p.20 / Chapter 4. --- RESEARCH METHODOLOGY --- p.22 / Chapter 4.1 --- DATA --- p.22 / Chapter 4.2 --- DEFINITION of hedging effectiveness and comparison criterion --- p.23 / Chapter 4.2.1 --- Definition of hedging effectiveness --- p.23 / Chapter 4.2.2 --- Comparison of ex-ante hedging performance --- p.24 / Chapter 4.3 --- Model description --- p.25 / Chapter 4.3.1 --- Conventional hedging model --- p.25 / Chapter 4.3.2 --- Error correction model (ECM) --- p.28 / Chapter 4.3.2.1 --- Unit root test --- p.29 / Chapter 4.3.2.2 --- Test of cointegration --- p.30 / Chapter 4.3.2.3 --- Construction of the error correction model (ECM) --- p.31 / Chapter 4.3.3 --- Time-varying hedging model --- p.32 / Chapter 4.3.3.1 --- Time-varying conditional hedging theory --- p.32 / Chapter 4.3.3.2 --- Test for the ARCH effect --- p.34 / Chapter 4.3.3.3 --- Bivariate ARCH(q) error correction model --- p.35 / Chapter 4.4 --- out-of-sample forecast --- p.37 / Chapter 4.4.1 --- Rolling samples against expanding sample --- p.37 / Chapter 4.4.2 --- Out-of-sample forecast without transaction cost --- p.37 / Chapter 4.4.3 --- Out-of-sample forecast with transaction cost --- p.39 / Chapter 5. --- DATA SUMMARY --- p.42 / Chapter 5.1 --- Preliminary analysis --- p.42 / Chapter 5.2 --- Unit root analysis --- p.43 / Chapter 5.3 --- Co-integration analysis --- p.44 / Chapter 6. --- EMPIRICAL RESULTS --- p.45 / Chapter 6.1 --- Model estimation --- p.45 / Chapter 6.2 --- Ex-ante hedging effectiveness with no transaction cost --- p.47 / Chapter 6.3 --- Ex-ante hedging effectiveness with transaction cost --- p.49 / Chapter 6.4 --- Summary and discussion on empirical findings --- p.50 / Chapter 6.4.1 --- Hedging superiority between the two futures contracts --- p.50 / Chapter 6.4.2 --- Magnitude of hedging performance --- p.51 / Chapter 6.4.3 --- Hedge ratio estimates --- p.56 / Chapter 6.4.4 --- Hedging effectiveness across investment horizon --- p.57 / Chapter 6.4.5 --- Model superiority --- p.57 / Chapter 7. --- CONCLUSION --- p.59 / APPENDIX --- p.84 / Chapter I) --- derivation of optimal hedge ratio under static hedging strategies --- p.84 / Chapter II) --- Derivation of optimal hedge ratios under dynamic hedging strategies --- p.85 / Chapter III) --- Causality test on the lead lag relationship between HKEFB and the two futures contracts --- p.87 / REFERENCES --- p.89

This thesis concerns with speculative carry trade strategy. Carry trade is based on breach of Uncovered Interest Parity. The theoretical part is focused on traditional fundamental analysis. This thesis deals with the identification of carry trade existence and capture their expressions in the financial markets, verification profitability and attractiveness of carry trade operations, analysis of conditions for carry trade on financial markets before and after global financial crisis 2008. Important part of the work was also description of the consequences of carry trade transactions and their effects on the exchange rate and financial situation

Previous research suggests that a policy interest rate cut below the reversal interest rate reverses the intended effect of monetary policy and becomes contractionary for lending. This paper is an empirical investigation into whether the reversal interest rate was breached in the Swedish negative interest rate environment between February 2015 and July 2016. We find that banks with a greater reliance on deposit funding were adversely affected by the negative interest rate environment, relative to other banks. This is because deposit rates are constrained by a zero lower bound, since banks are reluctant to introduce negative deposit rates for fear of deposit withdrawals. We show with a difference-in-differences approach that the most affected banks reduced loans to households and raised 5 year mortgage lending rates, as compared to the less affected banks, in the negative interest rate environment. These banks also experienced a drop in profitability, suggesting that the zero lower bound on deposits caused the lending spread of banks to be squeezed. However, we do not find evidence that the reversal rate has been breached. / Tidigare forskning menar att en sänkning av styrräntan under brytpunktsräntan gör att penningpolitiken får motsatt effekt och blir åtstramande för utlåning. Denna rapport är en empirisk studie av huruvida brytpunktsräntan passerades i det negativa ränteläget mellan februari 2015 och juli 2016 i Sverige. Våra resultat pekar på att banker vars finansiering till större del bestod av inlåning påverkades negativt av den negativa styrräntan, relativt till andra banker. Detta beror på att inlåningsräntor är begränsade av en lägre nedre gräns på noll procent. Banker är ovilliga att introducera negativa inlåningsräntor för att undvika att kunder tar ut sina insättningar och håller kontanter istället. Vi visar med en "difference-in-differences"-analys att de mest påverkade bankerna minskade lån till hushåll och höjde bolåneräntor med 5-åriga löptider, relativt till mindre påverkade banker, som konsekvens av den negativa styrräntan. Dessa banker upplevde även en minskning av lönsamhet, vilket indikerar att noll som en nedre gräns på inlåningsräntor bidrog till att bankernas räntemarginaler minskade. Vi hittar dock inga bevis på att brytpunktsräntan har passerats.

none

This thesis deals with interest rate swaps. In addition to chapters on basic principles of interest rate swaps also provides insight into the current situation in the derivative markets. The main part is devoted to the valuation of interest rate swaps, where is in addition to the theoretical site also solved the problem of obtaining the necessary data for calculations in practice. The conclusion of this work is devoted to two practical examples, which are dealing with the problem of the valuation of interest rate swaps.