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- Title
Pricing Bonds in the Australian Market.
- Authors
Bilson, Christopher M.; Brailsford, Timothy J.; Sullivan, Luke J.; Treepongkaruna, Sirimon
- Abstract
This paper provides an examination of term structure models in the Australian bond market. Specifically, we examine the comparative ability of various models to forecast at the short, medium and long ends of the yield curve. Overall, we find that model performance varies along the yield curve. Out-of-sample pricing tests show that most of the term structure models underprice a bond at the short and medium ends of the term structure and generally overprice bonds at the long end. Further, the level of mispricing is related to time-to-maturity, coupon payments and interest rate volatility. The results have implications for bond pricing in relatively illiquid markets like Australia's.
- Subjects
AUSTRALIA; BONDS (Finance); BOND prices; INVESTMENT interest; INTEREST rates; MARKET volatility; BOND insurance; BOND market; FINANCIAL markets
- Publication
Australian Journal of Management (University of New South Wales), 2008, Vol 33, Issue 1, p123
- ISSN
0312-8962
- Publication type
Article
- DOI
10.1177/031289620803300107