A1207
Title: Global bond market interaction using regime-switching dynamic term structure model
Authors: Takeshi Kobayashi - NUCB Business School (Japan) [presenting]
Abstract: The globalization process has significant impact on the world bond market. Global term structure dynamics are investigated by using a hierarchical factor model. We examine advanced countries and developing countries during 2003-2017 which focus on Asian sovereign bonds market which have increased steadily. We use a two-step state space model to extract the global factor. The results indicates yield curves of some countries possess their own dynamic while the other countries yield curves are strongly influenced by global level and slope factors. Regime switching extension of the global yield curve model are also developed. In this model the volatilities of global factor shift switch between two regimes. A previous method is implemented to construct likelihood function and unknown parameters. We show how the linkage between the global factor and country specific factors differs across two bond market volatility regimes.
Journal