Pricing bonds in the Australian market

Christopher M. Bilson, Timothy J. Brailsford, Luke J. Sullivan, Sirimon Treepongkaruna

Research output: Contribution to journalArticleResearchpeer-review

4 Citations (Scopus)

Abstract

This paper provides an examination of term structure models in the Australian bond market. Specifically, we examine the comparative ability of various models to forecast at the short, medium and long ends of the yield curve. Overall, we find that model performance varies along the yield curve. Out-of-sample pricing tests show that most of the term structure models underprice a bond at the short and medium ends of the term structure and generally overprice bonds at the long end. Further, the level of mispricing is related to time-to-maturity, coupon payments and interest rate volatility. The results have implications for bond pricing in relatively illiquid markets like Australia's.

Original languageEnglish
Pages (from-to)123-143
Number of pages21
JournalAustralian Journal of Management
Volume33
Issue number1
DOIs
Publication statusPublished - 2008
Externally publishedYes

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Term structure models
Yield curve
Bond pricing
Bond market
Mispricing
Interest rate volatility
Illiquid markets
Time to maturity
Payment
Term structure
Coupons
Pricing

Cite this

Bilson, C. M., Brailsford, T. J., Sullivan, L. J., & Treepongkaruna, S. (2008). Pricing bonds in the Australian market. Australian Journal of Management, 33(1), 123-143. https://doi.org/10.1177/031289620803300107
Bilson, Christopher M. ; Brailsford, Timothy J. ; Sullivan, Luke J. ; Treepongkaruna, Sirimon. / Pricing bonds in the Australian market. In: Australian Journal of Management. 2008 ; Vol. 33, No. 1. pp. 123-143.
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Bilson, CM, Brailsford, TJ, Sullivan, LJ & Treepongkaruna, S 2008, 'Pricing bonds in the Australian market' Australian Journal of Management, vol. 33, no. 1, pp. 123-143. https://doi.org/10.1177/031289620803300107

Pricing bonds in the Australian market. / Bilson, Christopher M.; Brailsford, Timothy J.; Sullivan, Luke J.; Treepongkaruna, Sirimon.

In: Australian Journal of Management, Vol. 33, No. 1, 2008, p. 123-143.

Research output: Contribution to journalArticleResearchpeer-review

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