Relative pricing of French Treasury inflation-linked and nominal bonds : an empirical approach using arbitrage strategies
| Autor: | Béatrice de Séverac, José Soares da Fonseca |
|---|---|
| Jazyk: | angličtina |
| Rok vydání: | 2021 |
| Předmět: |
Inflation
Economics and Econometrics Arbitrage 050208 finance Index (economics) Bond media_common.quotation_subject 05 social sciences Real interest rates Measure (mathematics) Inflation-linked bonds Treasury Duration 0502 economics and business Value (economics) Economics Econometrics 050207 economics Real interest rate General Economics Econometrics and Finance Inflation risk media_common |
| Popis: | This paper investigates whether arbitrage opportunities exist between inflation-linked bonds and nominal bonds on the French Treasury market. Following arbitrage theory, we apply the risk hedging concept: we set up self-financing portfolios hedged against risks through durations of different orders. Perfectly hedged portfolios are those with a zero initial and a zero final value. The results show arbitrage gains when the first three duration orders are implemented, but they are not significantly different from zero when a fourth-order duration is added. Furthermore, a regression of arbitrage gains on the illiquidity measure of nominal and index Treasury bonds provides evidence that the illiquidity of inflation-linked bonds significantly explains arbitrage gains, whereas the illiquidity measure of nominal bonds does not info:eu-repo/semantics/publishedVersion |
| Databáze: | OpenAIRE |
| Externí odkaz: |
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