Browsing by Author John Driffill

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  • Authors: John Driffill; Turalay Kenc; Martin Sola; Fabio Spagnolo (2009)

  • We examine several discrete-time versions of the Cox, Ingersoll and Ross (CIR) model for the term structure, in which the short rate is subject to discrete shifts. Our empirical analysis suggests that careful consideration of which parameters of the short-term interest rate equation that are allowed to be switched is crucial. Ignoring this issue may result in a parameterization that produces no improvement (in terms of bond pricing) relative to the standard CIR model, even when there are clear breaks in the data.

  • Real_options_with_priced_regime_switching_risk_Turalay et al.pdf.jpg
  • Journal Article


  • Authors: John Driffill; Turalay Kenc; Martin Sola (2013)

  • We develop a model of regime-switching risk premia as well as regime-dependent factor risk premia to price real options. The model incorporates the observation that the underlying risky income streams of real options are subject to discrete shifts over time as well as random changes. The presence of discrete shifts is due to systematic and unsystematic risk associated with changes in business cycles or in economic policy regimes or events such as takeovers, major changes in business plans. We analyze the impact of regime-switching behavior on the valuation of projects and investment opportunities. We find that accounting for Markov switching risk results in a delay in the expected tim...

Browsing by Author John Driffill

Jump to: 0-9 A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
or enter first few letters:  
Showing results 1 to 2 of 2
  • item.jpg
  • Journal Article


  • Authors: John Driffill; Turalay Kenc; Martin Sola; Fabio Spagnolo (2009)

  • We examine several discrete-time versions of the Cox, Ingersoll and Ross (CIR) model for the term structure, in which the short rate is subject to discrete shifts. Our empirical analysis suggests that careful consideration of which parameters of the short-term interest rate equation that are allowed to be switched is crucial. Ignoring this issue may result in a parameterization that produces no improvement (in terms of bond pricing) relative to the standard CIR model, even when there are clear breaks in the data.

  • Real_options_with_priced_regime_switching_risk_Turalay et al.pdf.jpg
  • Journal Article


  • Authors: John Driffill; Turalay Kenc; Martin Sola (2013)

  • We develop a model of regime-switching risk premia as well as regime-dependent factor risk premia to price real options. The model incorporates the observation that the underlying risky income streams of real options are subject to discrete shifts over time as well as random changes. The presence of discrete shifts is due to systematic and unsystematic risk associated with changes in business cycles or in economic policy regimes or events such as takeovers, major changes in business plans. We analyze the impact of regime-switching behavior on the valuation of projects and investment opportunities. We find that accounting for Markov switching risk results in a delay in the expected tim...