|
|
|
|
||||
|
||||
No-Arbitrage Restrictions and the U.S. Treasury MarketAndrea AjelloFederal Reserve Board Luca BenzoniFederal Reserve Bank of Chicago - Research Department Olena ChyrukFederal Reserve Bank of Chicago May 24, 2012 Economic Perspectives, Forthcoming Abstract: What is the role of arbitrage trading in the U.S. Treasury market? We discuss the pricing of risk-free Treasury securities via no-arbitrage arguments and illustrate how this approach works in models of the term structure of interest rates. The article continues with an evaluation of market frictions (for example, transaction costs, leverage constraints, and the limited availability of arbitrage capital) in the government debt market. We conclude with a discussion on the implications of such frictions for monetary policy and the pricing of bonds using no-arbitrage term structure models.
Number of Pages in PDF File: 20 Keywords: No-arbitrage restrictions, U.S. Treasury market, dynamic term structure models, affine models, limits to arbitrage JEL Classification: G12, E43, G21 Accepted Paper SeriesDate posted: May 8, 2012 ; Last revised: June 2, 2012Suggested CitationContact Information
|
|
||||||||||||||||||
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
FAQ
Terms of Use
Privacy Policy
Copyright
This page was processed by apollo4 in 0.547 seconds
