Question: Construct a term structure (for each of the frequencies listed below) based on Vasiceks Equilibrium Model of zero rates for 0.5, 1, 2, 3, 5,

Construct a term structure (for each of the frequencies listed below) based on Vasiceks Equilibrium Model of zero rates for 0.5, 1, 2, 3, 5, 7, 10, 20, and 30 years. Use (a) daily, and (b) weekly frequencies for the 3-month T-bill rate (the short-term rate) over the following two time periods using the rates are available on the Federal Reserve Economic Database (FRED): (i) from the beginning of the data period (January 1954) until December 2020, and (ii) from January 1, 2021, until the present.

1. Graph the term structure derived from the Vasicek Model and compare it with the par yield term structure based on market rates.

2. Compare and contrast the term structures derived from the two different time periods.

3. How does the market price of risk of the short rate differ across the two time periods? Any potential explanations?

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

Marathon Petroleum Inc. commenced operations on January 2, 2018, and has a year-end of December 31. It operates an oil refinery located on the Seaway and a chain of 36 gasoline stations in eastern...

Computing assignment based on Vasiceks Equilibrium Model of the Short Rate Construct a term structure (for each of the frequencies listed below) based on Vasiceks Equilibrium Model of zero rates for...

Hi, I have an Assignment for my Finance Subject. I have attached the necessary documentation here for you to view including the Lecture slides of all the Topics covered for this assignment. Please...

Please Provide a 2 to 3 page article review for each, there attached on this question. Your discussion should include a brief summary (including the big ideas or major points of the article) along...

2.7. Explicit Solutions to Dierential Equations 109 power (kw) 20 15 10 5 0 08:00 10:00 12:00 14:00 16:00 time 18:00 2.7 Explicit Solutions to Dierential Equations In the very rare case in which an...

Can you please help me answer two questions based on the readings below. 1 How would you contrast the mainstream economics view of consumer behavior in 9.3, with the demand curve in general, and also...

Alaska Oil Corporation Capital Budgeting Directed David Fay, Alaska Oil's financial vice president, is preparing a report for the monthly directors' meeting. An important issue is on the agenda, a...

Your discussion should include a brief summary (including the big ideas or major points of the article) along with some synthesis of the ideas and some of your own thoughts. You should draw any...

A. Determine the future periodic spot interest rates, at one period from now, on a one-step Ho-Lee model, using current periodic spot interest rate of A1 percent,current spot rate over two periods of...

Saginaw Company is a garden products wholesale firm. In December, Saginaw Company expects to sell 30,000 bags of vegetable fertilizer at an average price of $5.30 per bag. Actual results are 30,600...

Name and describe some of the types of social organizations.

During 2 0 2 4 , the inflation rate in Japan was 2 . 7 0 % while the inflation rate in the U . S . was 2 . 9 0 % . The real exchange rate of the Yen versus the Dollar: a . Appreciated 7 . 8 7 %...

10) For a bond that pays cash interest (i.e., not a zero coupon bond), YTM is (a) always equal to the coupon rate (b) always equal to the current yield (c) is always less than the coupon rate (d) can...

(Appendices) Compare and contrast the three major ways economies can be organized. What type of economy exists in the United States? Do you think another type of economy would be better? Explain your...

(Appendices) ADJUSTING ENTRIES AND PREPARATION OF FINANCIAL STATEMENTS. Sacramento Stores unadjusted trial balance as of December 31, 19x2, appears below: The following information is also available...

(Appendices) DETERMINING UNCOLLECTIBLE ACCOUNT EXPENSE USING THE AGING METHOD. At the beginning of the year, Tennyson Auto Parts had an accounts receivable balance of $31,800 and a balance in the...