Journal of Risk
ISSN:
1465-1211 (print)
1755-2842 (online)
Editor-in-chief: Farid AitSahlia
The bond-stock yield differential as a risk indicator in financial markets
Giorgio Consigli, Leonard C. MacLean, Yonggan Zhao, William T. Ziemba
Abstract
ABSTRACT
The trading prices for securities in financial markets can exhibit sudden shifts or reversals in direction. In this paper a methodology for asset price dynamics is presented where the diffusive component is combined with a risk process. The risk process accommodates deviations from an equilibrium process and reversions. The bond-stock yield differential is considered as a risk factor affecting the risk process. An approach using a "peaks over threshold" technique and conditional maximum likelihood is used to estimate parameters in the model. Numerical results for the period 1985-2004 in the US market validate the effectiveness of the model.
Copyright Infopro Digital Limited. All rights reserved.
As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (point 2.4), printing is limited to a single copy.
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (clause 2.4), an Authorised User may only make one copy of the materials for their own personal use. You must also comply with the restrictions in clause 2.5.
If you would like to purchase additional rights please email info@risk.net
