The Price of Fixed Income Market Volatility
Fixed income volatility and equity volatility evolve heterogeneously over time, co-moving disproportionately during periods of global imbalances and each reacting to events of different nature. While the methodology for options-based "model-free" pricing
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Antonio Mele Yoshiki Obayashi
The Price of Fixed Income Market Volatility
Springer Finance
Editorial Board Marco Avellaneda Giovanni Barone-Adesi Mark Broadie Mark Davis Emanuel Derman Claudia Klüppelberg Walter Schachermayer
Springer Finance Springer Finance is a programme of books addressing students, academics and practitioners working on increasingly technical approaches to the analysis of financial markets. It aims to cover a variety of topics, not only mathematical finance but foreign exchanges, term structure, risk management, portfolio theory, equity derivatives, and financial economics.
For further volumes: www.springer.com/series/3674
Antonio Mele r Yoshiki Obayashi
The Price of Fixed Income Market Volatility
Antonio Mele Swiss Finance Institute University of Lugano Lugano, Switzerland
ISSN 1616-0533 Springer Finance ISBN 978-3-319-26522-3 DOI 10.1007/978-3-319-26523-0
Yoshiki Obayashi Applied Academics LLC New York, NY, USA
ISSN 2195-0687 (electronic) ISBN 978-3-319-26523-0 (eBook)
Library of Congress Control Number: 2015958378 Mathematics Subject Classification (2010): 91G20, 91G30, 91G40, 91B25 Springer Cham Heidelberg New York Dordrecht London © Springer International Publishing Switzerland 2015 This work is subject to copyright. All rights are reserved by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, express or implied, with respect to the material contained herein or for any errors or omissions that may have been made. Printed on acid-free paper Springer is part of Springer Science+Business Media (www.springer.com)
Preface
The volatility of major asset classes is a key driver of portfolio performance affecting institutional and individual investors alike. Portfolio volatility may be managed by diversification through asset allocation and security selection decisions as well as by derivatives supplying direct exposure to volatility. Of the two main traditional assets—stocks and bonds—volatility derivatives and methodologies underlying their designs and pricing have been well-developed for equity markets, while fixed income markets have lagged in this respect despite its principal role in capital markets. This book fills
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