Predictive power of the implied volatility term structure in the fixed‐income market
应用Chen、Hsieh和Huang的利率模型，研究隐含波动率期限结构对债券超额收益的预测能力，该模型能系统总结100个互换期权价格并揭示其与经济状况的联系。
Abstract We apply the interest rate model of Chen, Hsieh, and Huang (CHH), the CHH model, to explore the implied volatility (IV) term structure's predictive power for bond excess returns. The CHH model has two advantages over existing models: (1) it delivers the IV of the interest rate, rather than the volatility of the swap rate on which the conventional swaption pricing model is built, and (2) the CHH model systematically summarizes 100 swaption prices into a volatility term structure with 10 succinct IVs. By exploiting these advantages, we demonstrate the IV term structure's predictive power and its connection to economic conditions.