Browsing by Author "Cortazar, Gonzalo"

Now showing 1 - 4 of 4
  • Thumbnail Image
    Item
    Can oil prices help estimate commodity futures prices? The cases of copper and silver
    (ELSEVIER SCI LTD, 2010) Cortazar, Gonzalo; Eterovic, Francisco
    There is an extensive literature on modeling the stochastic process of commodity futures. It has been shown that models with several risk factors are able to adequately fit both the level and the volatility structure of observed transactions with reasonable low errors.
  • Thumbnail Image
    Item
    Credit Spreads in Illiquid Markets: Model and Implementation
    (ROUTLEDGE JOURNALS, TAYLOR & FRANCIS LTD, 2012) Cortazar, Gonzalo; Schwartz, Eduardo S.; Tapia, Claudio
    This paper presents a methodology for estimating a family of credit spread term structures in a market with few transactions. The authors propose partitioning the market into risk classes and modeling credit spread term structures for each risk class using a multifactor Vasicek model with some common and some risk class-specific factors. The approach uses information on the cross section and time series of corporate bonds in all the risk classes to estimate the term structure of credit spreads in each risk class. The model is jointly estimated using an extended Kalman filter and implemented using Chilean corporate and government bonds.
  • Thumbnail Image
    Item
    Term-structure estimation in markets with infrequent trading
    (WILEY-BLACKWELL, 2007) Cortazar, Gonzalo; Schwartz, Eduardo S.; Naranjo, Lorenzo F.
    There are two issues that are of central importance in term-structure analysis. One is the modelling and estimation of the current term structure of spot rates. The second is the modelling and estimation of the dynamics of the term structure. These two issues have been addressed independently in the literature. The methods that have been proposed assume a sufficiently complete price data set and are generally implemented separately. However, there are serious problems when these methods are applied to markets with sparse bond prices. We develop a method for jointly estimating the current term-structure and its dynamics for markets with infrequent trading. We propose solving both issues by using a dynamic term-structure model estimated from incomplete panel-data. To achieve this, we modify the standard Kalman filter approach to deal with the missing-observation problem. In this way, we can use historic price data in a dynamic model to estimate the current term structure. With this approach we are able to obtain an estimate of the current term structure even for days with an arbitrary low number of price observations. The proposed methodology can be applied to a broad class of continuous-time term-structure models with any number of stochastic factors. To show the implementation of the approach, we estimate a three-factor generalized-Vasicek model using Chilean government bond price data. The approach, however, may be used in any market with infrequent trading, a common characteristic of many emerging markets. Copyright (c) 2007 John Wiley & Sons, Ltd.
  • Thumbnail Image
    Item
    The valuation of multidimensional American real options using the LSM simulation method
    (PERGAMON-ELSEVIER SCIENCE LTD, 2008) Cortazar, Gonzalo; Gravet, Miguel; Urzua, Jorge
    In this paper we show how a multidimensional American real option may be solved using the LSM simulation method originally proposed by Longstaff and Schwartz [2001, The Review of the Financial Studies 14(1): 113-147] for valuing a financial option and how this method can be used in a complex setting. We extend a well-known natural resource real option model, initially solved using finite difference methods, to include a more realistic three-factor stochastic process for commodity prices, more in line with current research. Numerical results show that the procedure may be successfully used for multidimensional models, expanding the applicability of the real options approach.