Modeling the time-varying volatility of the paper-bill spread

Farooq Malik, Bradley T. Ewing, Jamie B. Kruse, Gerald J. Lynch

Research output: Contribution to journalArticle

1 Scopus citations

Abstract

The spread between the rates on commercial paper and Treasury bills has received considerable attention in the literature for its role as an indicator of real economic activity. In this paper we empirically examine what happens when the volatility of the spread changes over time. We estimate a nonlinear model that enables us to discern the asymmetric impact of negative and positive shocks to the spread. We find that a positive shock has a larger impact on the volatility of the spread than does a negative shock.

Original languageEnglish
Pages (from-to)404-414
Number of pages11
JournalJournal of Economics and Business
Volume61
Issue number5
DOIs
StatePublished - Sep 2009

Keywords

  • EGARCH
  • Paper-bill spread
  • Volatility

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