Template-Type:ReDIF-Paper 1.0
Author-Name:Kentaro Kikuchi
Author-Name-First: Kentaro
Author-Name-Last: Kikuchi
Author-Email: kentaro-kikuchi@biwako.shiga-u.ac.jp
Author-Workplace-Name: Faculty of Economics, Shiga University
Title:Quadratic Gaussian Joint Pricing Model for Stocks and Bonds: Theory and Empirical Analysis
Abstract:This study proposes a joint pricing model for stocks and bonds in a no-arbitrage framework. A stock price representation is obtained in a manner consistent with the quadratic Gaussian term structure model, in which the short rate is the quadratic form of the state variables. In this study, specifying the dividend as a function using the quadratic form of the state variables leads to a stock price representation that is exponential-quadratic in the state variables. We prove that the coefficients determining the stock price have to satisfy some matrix equations, including an algebraic Riccati equation. Moreover, we specify the sufficient condition in which the matrix equations do have a unique solution. In our empirical analysis using Japanese data, we obtain estimates with a good fit to the actual data. Furthermore, we estimate the risk premiums for stocks and bonds and analyze how the BOJ's unconventional monetary policy has affected these risk premiums.
Creation-Date: 2015-01
Revision-Date:
Publication-Status:
File-URL: https://www.econ.shiga-u.ac.jp/risk/DPB14kikuchi20150107.pdf File-Format: Application/pdf
File-Function: First version, 2016
Number: 14
Classification-JEL: C13,E43,E44,G12
Keywords: risk premium, quadratic Gaussian term structure model, unscented Kalman filter, algebraic Riccati equation, controllability, portfolio rebalance
Handle: RePEc:shg:dpapeb:14
Template-Type: ReDIF-Paper 1.0
Author-Name: Kenshiro Ninomiya
Author-Name-First: Kenshiro
Author-Name-Last: Ninomiya
Author-Email: k-nino@biwako.shiga-u.ac.jp
Author-Workplace-Name: Faculty of Economics, Shiga University
Title: Financial Structure, Cycle, and Instability
Abstract:The subprime loan mortgage crisis has revived scholarly interest in Minsky's financial instability hypothesis. The related mathematical models present twotypes of Minskian financial structures. We construct macrodynamic models that consider both structures and discuss financial instability and cycles. We also demonstrate that one of the financial cycles occurs when a real factor stabilizes the economy. The burden of interest-bearing debt is an important determinant of the cycle. We posit that the escalating financial fragility in this cycle is a more appropriate interpretation of the Minskian financial structure that refers to hedging, speculative and Ponzi behaviors. We further demonstrate that another financial structure destabilizes the economy. If the instability occurs at the point of fragility, then the economy may deteriorate into financial crisis. Fragility then becomes instability.
Length: 35 pages
Creation-Date: 2015-07
Revision-Date: 2017-01
Publication-Status:
File-URL: https://www.econ.shiga-u.ac.jp/risk/DPB15Ninomiya20170127.pdf
File-Format: Application/pdf
File-Function: First version, 2015
Number: 15
Classification-JEL: E12, E32, E33, E43
Keywords: Minskian financial structure, financial fragility, business cycle, financial instability.
Handle: RePEc:shg:dpapeb:15
Template-Type: ReDIF-Paper 1.0
Author-Name: Kenshiro Ninomiya
Author-Name-First: Kenshiro
Author-Name-Last: Ninomiya
Author-Email: k-nino@biwako.shiga-u.ac.jp
Author-Workplace-Name: Faculty of Economics, Shiga University
Title: Financial Structure and Instability in an Open Economy
Abstract:The subprime loan mortgage crisis has revived scholarly interest in Minsky's financial instability hypothesis. The related mathematical models present two types of Minskian financial structures, which we identify as the lenders' risk type (LR) and the hedge, speculative and Ponzi type (HSP)We construct macrodynamic models in a fixed and floating exchange rate sys- tem which considers both the LR and HSP financial structures. We examine the effects of international capital mobility and international lenders' risks and demonstrate the significance of the LR and HSP financial structures in the fixed and floating exchange rate system. We emphasize the significance of stable financial structures in order to stabilize dynamic systems in an open economy.
Length: 22 pages
Creation-Date: 2017-02
Revision-Date:
Publication-Status:
File-URL: https://www.econ.shiga-u.ac.jp/risk/DPB16Ninomiya20170215.pdf
File-Format: Application/pdf
File-Function: First version, 2017
Number: 16
Classification-JEL:E12, E32, E33, E43
Keywords: Minskian financial structure, financial fragility, financial instability,international capital mobility
Handle: RePEc:shg:dpapeb:16
Template-Type:ReDIF-Paper 1.0
Author-Name:Bolorsuvd BATBOLD
Author-Name-First:Bolorsuvd
Author-Name-Last:BATBOLD
Author-Name: Kentaro Kikuchi
Author-Name-First:Kentaro
Author-Name-Last:Kikuchi
Author-Name: Koji Kusuda
Author-Name-First:Koji
Author-Name-Last:Kusuda
Author-Email: kusuda@biwako.shiga-u.ac.jp
Author-Workplace-Name: Faculty of Economics, Shiga University
Title: A Semi-analytical Solution to Consumption and International Asset Allocation Problem
Abstract:We consider a finite continuous-time optimal consumption and in-ternational asset allocation problem for an agent with CRRA utility, assuming a quadratic factor international security market model in which, latent factors are constituted of global economy factors and currency specific factors. It is not generally straightforward to find an analytical solution to the partial differential equation (PDE, hereafter) for the agent's indirect utility function, since a non-homogeneous term appears in the PDE. We apply a method of Liu [11] and Batbold et al. [4] to the PDE, and derive a semi-analytical solution. In the optimal investment ratio based on the solution, the market price of currency specific risk, the disparities between domestic and foreign market prices of global economy risk, and the disparities between domestic and for-eign market prices of currency specific risk appear.
Length: 26 pages
Creation-Date: 2019.10
Revision-Date:
Publication-Status:
File-URL: https://www.econ.shiga-u.ac.jp/risk/DPB17Kusuda.pdf
File-Format: Application/pdf
File-Function: First version, 2019
Number: 17
Classification-JEL:
Keywords:
Handle: RePEc:shg:dpapeb:17
Template-Type:ReDIF-Paper 1.0
Author-Name: Kentaro Kikuchi
Author-Email:kentaro-kikuchi@biwako.shiga-u.ac.jp
Author-Workplace-Name: Faculty of Economics, Shiga University
Title:A Global Joint Pricing Model of Stocks and Bonds Based on the Quadratic Gaussian Approach
Abstract:A Global Joint Pricing Model of Stocks and BondsBased on the Quadratic Gaussian Approach*Kentaro KikuchiAbstractThis work presents a joint model for bond prices, stock prices, and exchangerates within multi-currency economies. The model includes three types of la-tent factors: systematic factors that determine the domestic and foreign interestrates, stock-speci c factors, and currency-speci c factors. By incorporating thestochastic discount factor re ecting these three risk factors, we derive an analyt-ical formula for bond prices and stock prices, and exchange rates based on thequadratic Gaussian approach studied primarily in term structure modeling. Ourmodel has the distinctive feature of capturing market rates in a low interest rateenvironment. Furthermore, the model not only enables a simultaneous estimationof bond, equity and currency risk premiums but also provides a foundation forsolving an investment problem re ecting realistic market conditions.
Length: 16 pages
Creation-Date: 2019.12
Revision-Date:
Publication-Status:
File-URL: https://www.econ.shiga-u.ac.jp/risk/DPB18Kikuchi.pdf
File-Format: Application/pdf
File-Function: First version, 2020
Number: 18
Classification-JEL:E43, F31, G10,G12
Keywords:Stochastic discount factor, No arbitrage condition, Quadratic Gaus-sian term structure model, Algebraic Riccati equation
Handle: RePEc:shg:dpapeb:18
Template-Type:ReDIF-Paper 1.0
Author-Name: Kentaro Kikuchi
Author-Email:kentaro-kikuchi@biwako.shiga-u.ac.jp
Author-Workplace-Name: Faculty of Economics, Shiga University
Title: A Term Structure Interest Rate Model with the Exit Time from the Negative Interest Rate Policy
Abstract:In the government bond markets in Japan and a number of European countries, neg-ative interest rates have been observed in recent years. Incorporating a negative lowerbound for interest rates into a term structure model makes it possible for the model toreplicate yield curves that include negative rates. In this study, we propose a new termstructure model with a stochastic lower bound where the short rate is de ned as the sumof the quadratic form of the Gaussian process and a negative lower bound for interestrates. The lower bound is characterized by a Brownian bridge with the random intervalpinned at zero at the starting time and the end time of a negative interest rate policy(NIRP). Under this setting, we derive a zero coupon bond price formula by imposing theno arbitrage condition. We calibrate our proposed model using Japanese yield curve dataand estimate the implied posterior distribution of the time to exit from the NIRP.
Length: 15 pages
Creation-Date: 2020.3
Revision-Date:
Publication-Status:
File-URL: https://www.econ.shiga-u.ac.jp/risk/DPB19Kikuchi.pdf
File-Format: Application/pdf
File-Function: First version, 2020
Number: 18
Classification-JEL:E43, E52, G12
Keywords:Yield curve, No arbitrage condition, Quadratic Gaussian term structuremodel, Brownian bridge, Negative interest rate policy.
Handle: RePEc:shg:dpapeb:19