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Essays on Term Structure,Forward Premium Anomaly andGlobalization

Huang, Ting Ting (2010) Essays on Term Structure,Forward Premium Anomaly andGlobalization. Doctoral Dissertation, University of Pittsburgh. (Unpublished)

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Term structure models have attracted tremendous amount of attention in the last two decades. My first paper specifies the dynamic and cross-sectional behavior of bonds in the framework of the Linear or general affine term structure model (ATSM). After revisiting the basic theory of ATSM under the physical probability measure, a linear version, LTSM is proposed. We find theoretical loads of ATSM and LTSM by solving Riccati equations, with parameters chosen for the solution to match that from the principal two-component models. This paper is the first which provides an empirical model, and numerically studies the state spaces that guarantee the Black-Scholes equation is uniquely solvable and that the yields are always positive, so it clarifies the condition of Duffie and Kan (1996). The second paper utilizes the LTSM to study the forward premium anomaly. This allows me to model the behavior of the risk premium theoretically and empirically. I test my model using data on the Canadian-U.S. exchange rate. The dynamic factors are captured by Composite Principal Component Analysis (CPCA) which supplies adifferent way to set up the global factors for both currencies. Different from previous work in this area, the LTSM and ATSM can account for the anomaly, and the theoretical interest rates are guaranteed to be positive. Freund and Weinhold (2000, 2002 & 2004) stated that the Internet stimulates international trade. However, the data provided by World Bank is certainly not an ideal measure. My third paper presents a new way to measure the diffusion ofthe Internet, downloaded from Cooperative Association for Internet Data Analysis(CAIDA). The major findings are that a significant and positive relationship existsbetween Internet distance and the bilateral international trade volumes across tencountries. Furthermore, the magnitude of elasticity is discussed and further supportthe conclusion of Freund and Weinhold.


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Item Type: University of Pittsburgh ETD
Status: Unpublished
CreatorsEmailPitt UsernameORCID
Huang, Ting Tingtth4@pitt.eduTTH4
ETD Committee:
TitleMemberEmail AddressPitt UsernameORCID
Committee CoChairHusted, Stevenhusted1@pitt.eduHUSTED1
Committee CoChairChen, Xinfuxinfu@pitt.eduXINFU
Committee MemberCassing, Jamesjcassing@pitt.eduJCASSING
Committee MemberFeigenbaum,
Date: 30 September 2010
Date Type: Completion
Defense Date: 13 May 2010
Approval Date: 30 September 2010
Submission Date: 27 June 2010
Access Restriction: 5 year -- Restrict access to University of Pittsburgh for a period of 5 years.
Institution: University of Pittsburgh
Schools and Programs: Dietrich School of Arts and Sciences > Economics
Degree: PhD - Doctor of Philosophy
Thesis Type: Doctoral Dissertation
Refereed: Yes
Uncontrolled Keywords: Affine Model; Bond Yield; Distance; Exchange Rate; Forward Premium; Global Factor; Gravity Equation.; Internet; Term Structure; Globalization; Principal Component; Black-Scholes
Other ID:, etd-06272010-191620
Date Deposited: 10 Nov 2011 19:48
Last Modified: 15 Nov 2016 13:45


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