Term Structure Dynamics in Theory and Reality

This article is a critical survey of models designed for pricingfixed-income securities and their associated term structuresof market yields. Our primary focus is on the interplay betweenthe theoretical specification of dynamic term structure modelsand their empirical fit to historical changes in the shapesof yield curves. We begin by overviewing the dynamic term structuremodels that have been fit to treasury or swap yield curves andin which the risk factors follow diffusions, jump-diffusion,or have "switching regimes." Then the goodness-of-fit of thesemodels is assessed relative to their abilities to (i) matchlinear projections of changes in yields onto the slope of theyield curve; (ii) match the persistence of conditional volatilities,and the shapes of term structures of unconditional volatilities,of yields; and (iii) to reliably price caps, swaptions, andother fixed-income derivatives. For the case of defaultablesecurities we explore the relative fits to historical yieldspreads.     

Ownership Structure and Dividend Preference

Most Chinese listed companies have been transformed from state-owned enterprises; the resulting institutional transformation is characterized by the emergence of highly concentrated ownership and state-owned shares, which may exert an influence on corporate finance. We examine the relationship between ownership structure and cash dividend preference and then reexamine the same relationship with different levels of growth opportunities. The results reveal a positive relationship between cash dividend preference and state ownership, but the same relationship exists only in firms facing lower levels of investment opportunity. However, the ratio of employee shares and tradable shares correlates significantly and negatively with cash dividend preference.     

A Nonparametric Model of Term Structure Dynamics and the Market Price of Interest Rate Risk

This article presents a technique for nonparametrically estimating continuous-time diffusion processes that are observed at discrete intervals. We illustrate the methodology by using daily three and six month Treasury Bill data, from January 1965 to July 1995, to estimate the drift and diffusion of the short rate, and the market price of interest rate risk. While the estimated diffusion is similar to that estimated by Chan, Karolyi, Longstaff, and Sanders (1992) , there is evidence of substantial nonlinearity in the drift. This is close to zero for low and medium interest rates, but mean reversion increases sharply at higher interest rates.     

融资约束、股权结构和股利平稳性

稳定的分红对现金流要求较高,融资约束的存在可能会加剧企业对内部现金流的依赖,影响现金股利的发放。不同股权结构下代理成本差异很大,现金股利分配可以通过减少自由现金流来降低代理成本,因此股权结构对融资约束与股利平稳性关系的调节作用值得研究。从代理成本的视角,以我国2012—2016年A股上市公司数据为研究对象,对融资约束、股权结构和股利平稳性之间的关系进行了理论分析与实证检验。研究结果表明,融资约束抑制了股利平稳性,股权结构在二者之间的关系中起到了调节作用,具体表现为,国有控股、较高的股权集中度和股权制衡度均能够削弱融资约束对股利平稳性的负向影响。因此,加强上市公司股权结构的治理以及解决企业当前的融资困境对促进现金股利的平稳性尤为重要。     

Dividend Dynamics,Learning, and Expected Stock Index Returns

We present a latent variable model of dividends that predicts, out‐of‐sample, 39.5% to 41.3% of the variation in annual dividend growth rates between 1975 and 2016. Further, when learning about dividend dynamics is incorporated into a long‐run risks model, the model predicts, out‐of‐sample, 25.3% to 27.1% of the variation in annual stock index returns over the same time horizon, with learning contributing approximately half of the predictability in returns. These findings support the view that investors' aversion to long‐run risks and their learning about these risks are important in determining stock index prices and expected returns.     

债务到期结构的影响因素：理论和证据

从个别简单分析和逐步回归法分析结果可知,市场价值/账面价值、公司规模、固定资产比例和加权平均资产期限显著地影响中国上市公司债务到期结构.     

债务期限结构理论综述

企业的债务期限结构与企业价值是密切相关的。为此,一些经济学家对企业的债务期限结构进行了研究。这些研究成果大体上可以分为基于契约成本的理论、基于信息不对称的理论、基于税收的理论和基于期限匹配的理论。     

Income Insurance and the Equilibrium Term Structure of Equity

Output, wages, and dividends feature term structures of variance ratios that are respectively flat, increasing, and decreasing. Income insurance from shareholders to workers explains these term structures. Risk‐sharing smooths wages but only concerns transitory risk and hence enhances short‐run dividend risk. As a result, actual labor‐share variation largely forecasts the risk, premium, and slope of dividend strips. A simple general equilibrium model in which labor rigidity affects dividend dynamics and the price of short‐run risk reconciles standard asset pricing facts with the term structures of the equity premium, volatility, and macroeconomic variables, which are at odds in leading models.     

股利税与资本结构:中国的经验证据

已有研究主要考察了企业所得税对资本结构的影响,却较少有研究探讨个人所得税对资本结构的影响,基于中国的此类研究则处于空白。我国2012年颁布的股息红利差别化个人所得税政策,将投资者的股利税与持股时间相结合。基于这一税收改革,我们发现,投资者持股时间越长(短)的企业,因为在改革之后其投资者的股利税会下降(上升),这些企业债务融资的比重显著降低(提高)。此外,股利税对资本结构的影响,在股利支付力度较大的企业更为显著。进一步,股利税对不同类型债务融资比重的影响存在差异。本文的结论不仅为"税收与公司财务"这一经典的学术领域提供了来自中国的经验证据,也补充了中国在相关学术领域的缺失。     

Switching VARMA Term Structure Models

The purpose of this article is to propose a global discrete-timemodeling of the term structure of interest rates which is ableto capture simultaneously the following important features:(i) a historical dynamics of the factor driving term structureshapes involving several lagged values, and switching regimes;(ii) a specification of the stochastic discount factor (SDF)with time-varying and regime-dependent risk-premia; (iii) explicitor quasi explicit formulas for zero-coupon bond (ZCB) and interestrate derivative prices. We develop the switching autoregressivenormal (SARN) and the switching vector autoregressive normal(SVARN) Factor-Based Term Structure Models of order p. The factoris considered as a latent variable or an observable variable:in the second case the factor is a vector of several yields.Regime shifts are described by a Markov chain with (historical)nonhomogeneous transition probabilities. An empirical analysisof bivariate VAR(p) and SVARN(p) Factor-Based Term StructureModels, using monthly observations of the U.S. term structureof interest rates, and a goodness-of-fit and expectation hypothesispuzzle comparison with competing models in the literature, showsthe determinant role played by the observable nature of thefactor, lags, and switching regimes in the term structure modeling.     

Linear Information Dynamics,Dividend Irrelevance,Corporate Valuation and the Clean Surplus Relationship

This paper adopts the linear information dynamics framework pioneered in Ohlson (1979) and Garman and Ohlson (1980) (and subsequently used in, in particular, Ohlson, 1989, 1995 and Feltham and Ohlson, 1995) for thinking about desirable properties of earnings numbers in the context of the market valuation of firms, where such valuations are fundamentally based on expected future dividends. The first purpose of this paper is to consider the valuation-relevance of clean surplus earnings when there are two distinct components of clean surplus earnings whose evolutions are governed, along with book value and dividends, by a system of linear information dynamics, and dividend irrelevancy holds. The system of linear information dynamics assumed ensures that corporate value is a linear combination of the two components of clean surplus earnings, book value and dividends. One question becomes—under what circumstances are clean surplus earnings (combined with book value and dividends) sufficient for corporate valuation without a knowledge of the breakdown of clean surplus earnings into its separate components? This paper develops the conditions defining these circumstances. At the other extreme, another question can be asked—under what circumstances is one component of clean surplus earnings irrelevant to corporate valuation? This paper identifies some conditions that identify these latter circumstances. The second purpose of the paper is to identify implications of these results for both the traditional arguments about the desirability of measuring earnings on a clean surplus basis and also the more contemporary issues surrounding FRS3. A third purpose is to discuss the implications of the overall analysis for the empirical testing of the relationship between market prices and earnings numbers, and for empirically-justified definitions of maintainable earnings.     

Alternative Defaultable Term Structure Models

The objective of this paper is to consider defaultable term structure models in a general setting beyond standard risk-neutral models. Using as numeraire the growth optimal portfolio, defaultable interest rate derivatives are priced under the real-world probability measure. Therefore, the existence of an equivalent risk-neutral probability measure is not required. In particular, the real-world dynamics of the instantaneous defaultable forward rates under a jump-diffusion extension of a HJM type framework are derived. Thus, by establishing a modelling framework fully under the real-world probability measure, the challenge of reconciling real-world and risk-neutral probabilities of default is deliberately avoided, which provides significant extra modelling freedom. In addition, for certain volatility specifications, finite dimensional Markovian defaultable term structure models are derived. The paper also demonstrates an alternative defaultable term structure model. It provides tractable expressions for the prices of defaultable derivatives under the assumption of independence between the discounted growth optimal portfolio and the default-adjusted short rate. These expressions are then used in a more general model as control variates for Monte Carlo simulations of credit derivatives. Nicola Bruti-Liberati: In memory of our beloved friend and colleague.     

Affine Term Structure Models and the Forward Premium Anomaly

One of the most puzzling features of currency prices is the forward premium anomaly : the tendency for high interest rate currencies to appreciate. We characterize the anomaly in the context of affine models of the term structure of interest rates. In affine models, the anomaly requires either that state variables have asymmetric effects on state prices in different currencies or that nominal interest rates take on negative values with positive probability. We find the quantitative properties of either alternative to have important shortcomings.     

Design and Estimation of Quadratic Term Structure Models

We consider the design and estimation of quadratic term structuremodels. We start with a list of stylized facts on interest ratesand interest rate derivatives, classified into three layers: (1)general statistical properties, (2) forecasting relations, and (3)conditional dynamics. We then investigate the implications of eachlayer of property on model design and strive to establish amapping between evidence and model structures. We calibrate atwo-factor model that approximates these three layers ofproperties well, and show that a flexible specification for themarket price of risk is important in capturing the stylizedevidence in forecasting relations while factor interactions areindispensable in generating the hump-shaped dynamics of bondyields.     

Optimal Capital Structure,Endogenous Bankruptcy,and the Term Structure of Credit Spreads

This article examines the optimal capital structure of a firm that can choose both the amount and maturity of its debt. Bankruptcy is determined endogenously rather than by the imposition of a positive net worth condition or by a cash flow constraint. The results extend Leland's (1994a) closed-form results to a much richer class of possible debt structures and permit study of the optimal maturity of debt as well as the optimal amount of debt. The model predicts leverage, credit spreads, default rates, and writedowns, which accord quite closely with historical averages. While short term debt does not exploit tax benefits as completely as long term debt, it is more likely to provide incentive compatibility between debt holders and equity holders. Short term debt reduces or eliminates “asset substitution” agency costs. The tax advantage of debt must be balanced against bankruptcy and agency costs in determining the optimal maturity of the capital structure. The model predicts differently shaped term structures of credit spreads for different levels of risk. These term structures are similar to those found empirically by Sarig and Warga (1989). Our results have important implications for bond portfolio management. In general, Macaulay duration dramatically overstates true duration of risky debt, which may be negative for “junk” bonds. Furthermore, the “convexity” of bond prices can become “concavity.”     

Identifying Term Structure Volatility from the LIBOR-Swap Curve

This paper proposes a new family of specification tests andapplies them to affine term structure models of the London InterbankOffered Rate (LIBOR)-swap curve. Contrary to Dai and Singleton(2000), the tests show that when standard estimation techniquesare used, affine models do a poor job of forecasting volatilityat the short end of the term structure. Improving the volatilityforecast does not require different models; rather, it requiresa different estimation technique. The paper distinguishes betweentwo econometric procedures for identifying volatility. The "cross-sectional"approach backs out volatility from a cross section of bond yields,and the "time-series" approach imputes volatility from time-seriesvariation in yields. For an affine model, the volatility impliedby the time-series procedure passes the specification tests,while the cross-sectionally identified volatility does not.This is surprising, since under correct specification, the "cross-sectional"approach is maximum likelihood. One explanation is that affinemodels are slightly misspecified; another is that bond yieldsdo not span volatility, as in Collin-Dufresne and Goldstein(2002).     

Heterogeneous Beliefs, the Term Structure and Time-varying Risk Premia

This paper demonstrates theoretically and empirically that one possible economic explanation of the dynamics of the term structure of interest rates is the time-varying heterogeneous beliefs about future economic conditions. Assuming that each agent forms heterogeneous expectations about both his income shock and others’ beliefs about their income shocks each period, the paper illustrates that heterogeneous beliefs generate time-varying risk premia of the term structure in a closed-form solution. Motivated by this theory, several empirical tests are conducted using the cross-sectional mean and dispersion of belief indices that are extracted as the differences between non-judgemental econometric forecasts based on diffusion indices in Stock and Watson (J Bus Econ Stat, 2002) and professional survey forecasts. It is shown that (a) an increase in the mean belief about inflation steepens the yield curve, (b) the mean and dispersion of interest rate beliefs help explain the mean and the stochastic volatility of the term structure, suggesting that time-varying risk premia may be explained by endogenous uncertainty caused by heterogeneous beliefs in the economy.I am indebted to Mordecai Kurz, Timothy Cogley and Narayana Kocherlakota for constant support and extensive discussions that inspired this work. I would like to thank Randall Moore for providing the Blue Chip financial forecast data. The financial support from the Smith Richardson Foundation to the Stanford Institute for Economic Policy Research is gratefully acknowledged.     

中国国债利率期限结构模型研究与实证分析

本文在概述国债利率期限结构模型的基础上,针对当前被发达国家广泛采用的NS和SV模型所存在的不足,通过扩展指数多项式的方法,构建出NSM模型。为了更好地估算利率期限结构模型中的参数,本研究针对目标函数优化求解,经分析比较多种优化算法后,确定选用GRG2非线性最优化算法。通过使用上海证券交易所2005.1.4～2007.11.30的国债每日交易数据对NS、SV、NSM三个模型的实证分析比较,表明NSM模型不仅保留了NS模型的经济含义,克服了SV模型参数估计依赖初值的缺点,能够反映出利率曲线多峰的情况;而且其在拟合精度、价格误差等多项指标上均优于NS模型和SV模型,并具有良好的适应性和稳健性,能够满足我国当前的国债市场需要。     

Beyond Single-Factor Affine Term Structure Models

This article proposes a new approach to testing for the hypothesisof a single priced risk factor driving the term structure ofinterest rates. The method does not rely on any parametric specificationof the state variable dynamics or the market price of risk.It simply exploits the constraint imposed by the no-arbitragecondition on instantaneous expected bond returns. In order toachieve our goal, we develop a Kolmogorov-Smirnov test and applyit to data on Treasury bills and bonds for both the United Statesand Spain. We find that the single risk factor hypothesis cannotbe rejected for either dataset.     

The Term Structure with Semi-credible Targeting

The Federal Reserve sets targets for interest rates which it enforces through direct market intervention. These targets are changed periodically. In this paper, we develop a term structure model in which the short rate is subject to a control which keeps it close to a target which changes from time to time. The probability of target changes is not constant in the model, but changes as a function of observables. The model performs well at explaining the shifts in the yield curve that accompany target changes.