||A Dynamic Bond Pricing Model with Application to the Japanese Government Bonds
Kamizono, Kenji ,
Kariya, TakeakiYamamura, Yoshiro
69 , 2016-06-30 , 長崎大学経済学部
In this paper, we generalize the cross-sectional fixed-coupon bond pricing model of Kariya et. al．(2012) to a dynamic one. The bond prices are modeled as the present values of the future cash-flows where the discount functions are stochastic and may depend on the bond attributes. In our framework, the cross-sectional and time-series covariance structure among the stochastic discount functions depends on the difference of the time-to-maturity of the bonds. We also propose a bond price forecast method using our model. The empirical result and the forecast performance on the Japanese government bonds are presented.