Tag Archives: Working Paper

A Guide to Duration, DV01, and Yield Curve Risk Transformations

Yield curve risk and sensitivities (DV01s) can be measured with respect to different variables: forward rates, par rates, zero yields, or others. This paper describes a simple method for transforming sensitivities between alternate representations and provides examples. The benefit of … Continue reading

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Probability, Expected Utility, and the Ellsberg Paradox

The Ellsberg paradox is often cited as evidence for unknowable “ambiguity” versus computable “risk”, and a refutation of expected utility maximization and “subjective” or “belief-type” probabilities. I have concluded the paradox is not convincing. The results can be explained by … Continue reading

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Employment and Unemployment Flows

This is the summary of a 45-page paper (.pdf) available for download at SSRN SUMMARY Unemployment in the U.S. has risen dramatically since the start of the recession in December 2007, going from about 6.8 million people in May 2007 … Continue reading

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A Primer on Credit Default Swaps

What is a CDS? How does a CDS behave in response to changes in the markets? How does one value a CDS? What is the risk? This primer aims to answer these questions for plain-vanilla single-name CDS, showing that a … Continue reading

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Estimating The Correlation Of Non-Contemporaneous Time-Series

This paper examines the statistical problem of estimating the correlation of non-contemporaneous time-series observations such as daily returns for the FTSE and S&P500 stock indexes. A December 2007 .pdf version is available on SSRN, and there is an abridged version.

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A Practical Guide To Bonds And Swaps

This manual provides a practical introduction to the fixed income capital markets. It is intended to provide the practical, institutional aspects of the markets together with the fundamental concepts used in today’s capital markets. In line with their ubiquity throughout … Continue reading

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Fitting Forward Rates To Market Data

This paper has two purposes. First, to outline a general framework or methodology for fitting the forward curve to market data. Second, to report on and compare results from fitting forward curves using three particular functional forms: piece-wise constant forward … Continue reading

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A Dynamic Model of Labor Supply Under Uncertainty 1985

This paper lays out the model as in the 1981 paper but also discusses estimation and identification in some detail. Simplifies to a stationary environment with a single wage and then fits gross flow data. Includes empirical results showing interesting … Continue reading

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A Dynamic Model of Labor Supply Under Uncertainty 1981

This paper lays out the theory of a three-state model of labor supply (job, unemployed, and out of the labor force) in full detail – stationary and non-stationary, discrete and continuous time. Proves existence and uniqueness of the value function. … Continue reading

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