Abstract
The term structure of KTB (Korea Treasury Bond) is empirically implemented and forecasted by the extended 2-factor CIR model. Pearson and Sun model. MLE is applied to estimate parameters. Using KTB prices forecasted by the model, strategies of trading and hedge between KTB, KTF (Korea Treasury Futures) are established. In this article we can see that Pearson and Sun model appropriately explains the term structure of KTB but does not fit forecasting KTB prices. However, the model well forecasts the direction of interest rate moving up or down. Through such a forecast‘ profit via trading KTB and KTF can be realized.
Keywords
Citation
Kim, T.S., Lee, Y.K. and Hyun, J.-S. (2005), "An Empirical Analysis on Trading strategy of KTB and KTF Using the Two Factors CIR Term Structure Model", Journal of Derivatives and Quantitative Studies: 선물연구, Vol. 13 No. 1, pp. 77-97. https://doi.org/10.1108/JDQS-01-2005-B0004
Publisher
:Emerald Publishing Limited
Copyright © 2005 Emerald Publishing Limited
License
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