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An Introduction to Derivative Securities, Financial Markets, and Risk ManagementAdvanced Financial Risk Management, 2nd ed.

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The author wishes to thank his colleague, Managing Director for Research Prof. Robert A. Jarrow, for twenty years of guidance and helpful conversations on this critical topic.

The Swedish Government Bond yield curve and its history offer one of the most important laboratories for the study of interest rate movements among the prominent bond markets world-wide. The Swedish Government Bond history made available by the Sveriges Riksbank begins in 1987, and the long history includes extended periods of very high rates, very low rates, and negative rates. For that reason, the Heath Jarrow and Morton (“HJM”) analysis on Swedish Government Bonds provides an important benchmark for interest rate modeling in economies where the government yield history is not as rich as it is in Sweden.

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The author wishes to thank his colleague, Managing Director for Research Prof. Robert A. Jarrow, for twenty years of guidance and helpful conversations on this critical topic.

The Australia Commonwealth Government Securities yield curve and its history are a prime topic for risk management analysis, given the stock market chaos around the world and the relatively calm and peaceful evolution of interest rates in Australia. Is the yield curve for Commonwealth Government Securities unique and different compared to other markets, or does it exhibit the same basic interest rate characteristics? We answer that question in this note.

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The author wishes to thank his colleague, Managing Director for Research Prof. Robert A. Jarrow, for twenty years of guidance and helpful conversations on this critical topic.

The German Bund yield curve and its history are critical components for the derivation and validation of interest rate risk models for asset and liability management, market risk, economic capital, interest rate risk in the banking book, stress-testing and the internal capital adequacy assessment process. There are some interesting contrasts between results for the German Bund yield curve analysis on a stand-alone basis and world-wide experience because the German Bund data set spans a fairly narrow range of rate levels and is a short data series by international standards.

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The author wishes to thank his colleague, Managing Director for Research Prof. Robert A. Jarrow, for twenty years of guidance and helpful conversations on this critical topic.

The United Kingdom Government Bond yield curve and its history is a critical data set for the derivation and validation of interest rate risk models for asset and liability management, market risk, economic capital, interest rate risk in the banking book, stress-testing and the internal capital adequacy assessment process. The importance of the United Kingdom Government Bond market is not just due to its prominence among the world’s major fixed income markets.

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The author wishes to thank his colleague, Managing Director for Research Prof. Robert A. Jarrow, for twenty years of guidance and helpful conversations on this critical topic.

In 2005, economist Richard Koo and The Economist warned that U.S. home prices were in for a collapse much like that seen in Japan after the bubble in real estate and stock prices peaked in December, 1989. “The U.S. is not Japan,” was a phrase used to dismiss any “foreign” data out of hand, much like the 1980s Japanese Minister of International Trade and Industry who stated that foreign ski makers could not compete in Japan because “Japanese snow is different.” In this note, we focus on a critical issue in many countries: what does the experience of other countries with very low interest rates tell us about what lies ahead for U.S. and European interest rates and interest rate risk analysis?

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