Term Structure Estimation in Illiquid Government Bond Markets: An Empirical Analysis for India

Dutta, G and Basu, S and Vaidyanathan, K (2005) Term Structure Estimation in Illiquid Government Bond Markets: An Empirical Analysis for India. Journal of Emerging Market Finance, 4 (1). pp. 63-80.

Full text not available from this repository. (Request a copy)

Abstract

With increasing liquidity of the Indian sovereign debt market since 1997, it has become possible to estimate the term structure in India. However, the market is characterised by several frictions that cause individual securities to be priced differently from the ‘average’ pricing in the market. In such a scenario, traditional estimation procedures like ordinary least squares using various functional forms do not perform well. In this paper, we find that mean absolute deviation is a better estimation procedure in illiquid markets than the ordinary least square. We further discover a novel liquidity weighted objective function for parameter estimation. We model the liquidity function using the exponential and hyperbolic tangent functions and suggest the most robust model for estimating term structures in India.

Affiliation: Indian School of Business
ISB Creators:
ISB CreatorsORCiD
Vaidyanathan, KUNSPECIFIED
Item Type: Article
Additional Information: The research paper was published by the author with the affiliation of JPMorgan, Singapore.
Uncontrolled Keywords: Finance, Fixed income securities, Non-linear constrained optimisation
Subjects: Finance
Depositing User: Ilayaraja M
Date Deposited: 21 Jun 2019 20:54
Last Modified: 21 Jun 2019 20:54
URI: http://eprints.exchange.isb.edu/id/eprint/1163
Publisher URL: https://doi.org/10.1177/097265270400400104
Publisher OA policy: http://sherpa.ac.uk/romeo/issn/0972-6527/
Related URLs:

Actions (login required)

View Item View Item
Statistics for DESI ePrint 1163 Statistics for this ePrint Item