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This study aims to shed more light on the relationship between probability of default, investment horizons and rating classes to make decision-making processes more efficient.

Based on credit default swaps (CDS) spreads, a methodology is implemented to determine the implied default probability and the implied rating, and then to estimate the term structure of the market-implied default probability and the transition matrix of implied rating. The term structure estimation in discrete time is conducted with the Nelson and Siegel model and in continuous time with the Vasicek model. The assessment of the transition matrix is performed using the homogeneous Markov model.

The results show that the CDS-based implied ratings are lower than those based on Thomson Reuters approach, which can partially be explained by the fact that the real-world probabilities are smaller than those founded on a risk-neutral framework. Moreover, investment and sub-investment grade companies exhibit different risk profiles with respect of the investment horizons.

The originality of this study consists in determining the implied rating based on CDS spreads and to detect the difference between implied market rating and the Thomson Reuters StarMine rating. The results can be used to analyze credit risk assessments and examine issues related to the Thomson Reuters StarMine credit risk model.

This study comprehensively aims to review the key influential and intellectual aspects of spillovers between Islamic and conventional financial markets.

The study uses the bibliometric and content analysis methods using the VOSviewer software to analyse 52 academic documents derived from the Web of Sciences (WoS) between 2015 and June 2022.

The results demonstrate the influential aspects of spillovers between Islamic and conventional financial markets, including the leading authors, journals, countries and institutions and the intellectual aspects of literature. These aspects are synthesised into four main streams: research between stock indexes; studies between stock indexes, oil and precious metal; works between Sukuk, bond and indexes; and empirical studies review. The authors also propose future research directions in spillovers between Islamic and conventional financial markets.

Our study is subject to several limitations. Firstly, the authors only used the WoS database. Secondly, the study only includes papers and reviews written in English from the WoS. This study assists academic scholars, practitioners and regulatory bodies in further exploring the suggested issues in future studies and improving and predicting economic and financial stability.

To the best of the authors’ knowledge, no extant empirical studies have been conducted in this area of research interest.

The purpose of this research is to develop and test a mathematical method of deriving zero yield curve from market prices of government bonds.

The method is based on a forward curve approximated by a linear (or piecewise constant) spline and should be applicable even for markets with low liquidity. The best fitting curve is derived by minimizing the penalty function. The penalty is defined as a sum of squared price discrepancies (theoretical curve based price minus market closing price) weighted by trade volume and an additional penalty for non‐smoothness of the yield curve.

This method is applied to both nominal and CPI linked bonds traded in Israel (some segments of these markets have low liquidity). The resulting two yield curves are used for derivation of market expected inflation rate.

The main problems are low liquidity of some bonds and imperfect linkage to inflation in the CPI linked market.

A stable numerical procedure applicable even in markets with low liquidity.

Usage of forward curves as the state space for the minimization problem leads to a stable solution that fits the data very well and can be used for calculating forward rates.

This paper investigates a retrospective on the Journal of Derivatives and Quantitative Studies (JDQS) on its 30th anniversary based on bibliometric. JDQSs yearly publications, citations, impact factors, and centrality indices grew up in early 2010s, and diminished in 2020. Keyword network analysis reveals the JDQS's main keywords including behavioral finance, implied volatility, information asymmetry, price discovery, KOSPI200 futures, volatility, and KOSPI200 options. Citations of JDQS articles are mainly driven by article age, demeaned age squared, conference, nonacademic authors and language. In comparison between number of views and downloads for JDQS articles, we find that recent changes in publisher and editorial and publishing policies have increased visibility of JDQS.

We analyze the interaction among the common and country-specific components for the inflation rates in 12 euro area countries through a factor model with time-varying parameters. The variation of the model parameters is driven by the score of the predictive likelihood, so that, conditionally on past data, the model is Gaussian and the likelihood function can be evaluated using the Kalman filter. The empirical analysis uncovers significant variation over time in the model parameters. We find that, over an extended time period, inflation persistence has fallen and the importance of common shocks has increased relatively to that of idiosyncratic disturbances. According to the model, the fall in inflation observed since the sovereign debt crisis is broadly a common phenomenon since no significant cross-country inflation differentials have emerged. Stressed countries, however, have been hit by unusually large shocks.

Forecasting the future movement of yield curves contains valuable information for both academic and practical issues such as bonding pricing, portfolio management, and government policies. The purpose of this paper is to develop a dynamic factor approach that can provide more precise and consistent forecasting results under various yield curve dynamics.

The paper develops a unified dynamic factor model based on Diebold and Li (2006) and Nelson and Siegel (1987) three-factor model to forecast the future movement yield curves. The authors apply the state-space model and the Kalman filter to estimate parameters and extract factors from the US yield curve data.

The authors compare both in-sample and out-of-sample performance of the dynamic approach with various existing models in the literature, and find that the dynamic factor model produces the best in-sample fit, and it dominates existing models in medium- and long-horizon yield curve forecasting performance.

The authors find that the dynamic factor model and the Kalman filter technique should be used with caution when forecasting short maturity yields on a short time horizon, in which the Kalman filter is prone to trade off out-of-sample robustness to maintain its in-sample efficiency.

Bond analysts and portfolio managers can use the dynamic approach to do a more accurate forecast of yield curve movements.

The enhanced forecasting approach also equips the government with a valuable tool in setting macroeconomic policies.

The dynamic factor approach is original in capturing the level, slope, and curvature of yield curves in that the decay rate is set as a free parameter to be estimated from yield curve data, instead of setting it to be a fixed rate as in the existing literature. The difference range of estimated decay rate provides richer yield curve dynamics and is the key to stronger forecasting performance.

The purpose of this paper is to present an empirical analysis of the European Central Bank (ECB) deposit rate dynamics during 2014–2020, attempting to answer how deep could be cut further this rate without causing persistent yield curve inversions (YCI), i.e. lower yields for longer terms. It addresses the sustainability of the traditional banking and shows that inverted yield curves would require changing the banking-as-usual model to the government-guaranteed long-term-borrowing coupled with short-term-lending. This research poses the question of whether the banking sector should become a public utility.

The future scenarios of negative interest rate (NIR) behavior are modeled seeking to increase the understanding of NIR environment. Using an event-study design, empirical analyses of the ECB deposit rate cuts on the Euro Over-Night Index Average rates is performed at different maturities.

This study finds that, starting from the lower limit of 80 basis points below zero, the ECB deposit rate is likely to result in complete YCIs.

This paper evidences that moving rates into a more negative territory is likely to be completely counterproductive for banking industry, implying that banking at such conditions would become heavily dependent on governmental support. The results shed light on the interdependence of the banking business, financial monetary policy and welfare of the society, providing policymakers with empirically defined milestones for policy implementations.

This paper clarifies the impact of the ECB deposit rate on the overall shape of yield curves. The novelty of this research resides in investigation of YCI by simulating NIR dynamics.

Without precedent, green bonds confront, for the first time since their emergence, a twofold crisis context, namely the Covid-19-Russian–Ukrainian crisis period. In this context, this paper aims to investigate the connectedness between the two pioneering bond market classes that are conventional and treasury, with the green bonds market.

In their forecasting target, authors use a Support Vector Regression model on daily S&P 500 Green, Conventional and Treasury Bond Indexes for a year from 2012 to 2022.

Authors argue that conventional bonds could better explain and predict green bonds than treasury bonds for the three studied sub-periods (pre-crisis period, Covid-19 crisis and Covid-19-Russian–Ukrainian crisis period). Furthermore, conventional and treasury bonds lose their forecasting power in crisis framework due to enhancements in market connectedness relationships. This effect makes spillovers in bond markets more sensitive to crisis and less predictable. Furthermore, this research paper indicates that even if the indicators of the COVID-19 crisis have stagnated and the markets have adapted to this rather harsh economic framework, the forecast errors persist higher than in the pre-crisis phase due to the Russian–Ukrainian crisis effect not yet addressed by the literature.

This study has several implications for the field of green bond forecasting. It not only illuminates the market participants to the best market forecasters, but it also contributes to the literature by proposing an unadvanced investigation of green bonds forecasting in Crisis periods that could help market participants and market policymakers to anticipate market evolutions and adapt their strategies to period specificities.

Long-term interest rates of small open economies (SOE) correlate strongly with the USA long-term rate. Can central banks in those countries decouple from the United States? An estimated Dynamic Stochastic General Equilibrium (DSGE) model for the UK (vis-á-vis the USA) establishes three structural empirical results: (1) Comovement arises due to nominal fluctuations, not through real rates or term premia; (2) the cause of comovement is the central bank of the SOE accommodating foreign inflation trends, rather than systematically curbing them; and (3) SOE may find themselves much more affected by changes in USA inflation trends than the United States itself. All three results are shown to be intuitive and backed by off-model evidence.