RT Journal Article
T1 Sequential arbitrage measurements and interest rate envelopes
A1 Balbás, Alejandro
A1 López, Susana
AB This paper proposes new measures that provide us with the level of sequentialarbitrage in bond markets. All the measures vanish in an arbitrage-free market and all of them are positive otherwise. Each measure is generated by a dual pair of optimization problems. Primal problems permit us to compute optimal sequential arbitrage strategies, if available. Each dual problem generates a concrete proxy for the term structure of interest rates. The set of proxies allows us to obtain the exactmarket price of any bond and may measure several effects. For instance, the creditrisk spread of nondefault free bonds, or the embedded option price of callable orextendible bonds. The developed theory has been tested empirically.
PB Springer
SN 0022-3239
YR 2008
FD 2008-09
LK https://hdl.handle.net/10016/14001
UL https://hdl.handle.net/10016/14001
LA eng
NO Research partially supported by Welzia Management SGIIC, RD_Sistemas, Comunidad Autónoma de Madrid (Spain), Grant s-0505/tic/000230, and MEyC (Spain), Grant SEJ2006-15401-C04-03
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RD 27 jul. 2024