Arbeitspapier
Measuring limits of Arbitrage in fixed-income markets
We use relative value to measure limits to arbitrage in fixed-income markets. Relative value captures apparent deviations from no-arbitrage relationships. It is simple, intuitive and can be computed model-free for any bond. A pseudo-trading strategy based on relative value generates higher returns than one based on the well-known noise measure. The relative value is therefore a better proxy for limits to arbitrage. We construct relative value indices for the US, UK, Japan, Germany, Italy, France, Switzerland and Canada. Limits to arbitrage increase with the scarcity of capital: we find that each index is correlated with local volatility and funding costs. Limits to arbitrage also exhibit strong commonality across countries, consistent with the international mobility of capital. The relative value indices are updated regularly and available publicly.
- Sprache
-
Englisch
- Erschienen in
-
Series: Bank of Canada Staff Working Paper ; No. 2017-44
- Klassifikation
-
Wirtschaft
Asset Pricing; Trading Volume; Bond Interest Rates
- Thema
-
Asset pricing
Financial markets
International financial markets
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Fontaine, Jean-Sébastien
Nolin, Guillaume
- Ereignis
-
Veröffentlichung
- (wer)
-
Bank of Canada
- (wo)
-
Ottawa
- (wann)
-
2017
- DOI
-
doi:10.34989/swp-2017-44
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:41 MEZ
Datenpartner
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
Objekttyp
- Arbeitspapier
Beteiligte
- Fontaine, Jean-Sébastien
- Nolin, Guillaume
- Bank of Canada
Entstanden
- 2017
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