Ken Nyholm

Ken Nyholm
European Central Bank · Directorate Risk Management

PhD

About

32
Publications
3,791
Reads
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382
Citations
Introduction
Research Interests: Asset allocation, Asset and Liability modelling, Fixed income analysis, applied econometrics Current Projects: (a) a term structure model for strategic asset allocation; (b) the market for green bonds; (c) pension liability dynamics
Additional affiliations
June 2001 - February 2019
European Central Bank
Position
  • Economist
June 1998 - July 2000
Aarhus Business School
Position
  • Professor (Assistant)

Publications

Publications (32)
Preprint
Full-text available
A discrete-time no-dominance term structure model is developed. Four factors are modelled and explicitly defined to be: the short rate, the slope and curvature of the term structure of term-premia, and a measure that captures sovereign-specific features. We argue that these factors are directly useful for policy analysis and for investment professi...
Book
The text is intended for students and practitioners as a gentle and intuitive introduction to the field of discrete-time yield curve modelling. I strive to be as comprehensive as possible, while still adhering to the overall premise of putting a strong focus on practical applications. In addition to a thorough description of the Nelson-Siegel family...
Article
Full-text available
In this paper we compare the in-sample fit and out-of-sample forecasting performance of no-arbitrage quadratic and essentially affine term structure models, as well as the dynamic Nelson-Siegel model. In total eleven model variants are evaluated, comprising five quadratic, four affine and two Nelson-Siegel models. Recursive re-estimation and out-of...
Article
Full-text available
Conditional expected shortfalls calculated for European insurance companies and banks under stressed market conditions are shown to be of similar magnitudes. Measured at 95% and 99% stress levels, on data covering the period from 1995 to 2011, the equity-return tail losses of insurance undertakings and banks are indistinguishable. Granger causality...
Chapter
Surprisingly little attention has been paid in the academic literature to the forecasting of credit spreads1. Although this is understandable, and in line with traditional academic progression where one aims to fully understand the in-sample behaviour of a phenomenon before starting to develop theories and models for how this phenomenon could behav...
Article
The goal of strategic asset allocation (SAA) is to find an optimal allocation of funds across different asset classes subject to a relatively long investment horizon. The optimal allocation of funds should always reflect the risk–return preferences of an institution and the machinery underlying the strategic asset allocation decisions should be bas...
Article
Full-text available
Two methods for evolving forward the yield curve are evaluated and contrasted within a Monte Carlo experiment: one is originally presented by Rebonato et al. (2005) and the other by Bernadell et al. (2005). A detailed account for how to implement the models is also presented. Results suggest that the two techniques are complementary and able to cap...
Article
We test whether the Nelson and Siegel (1987) yield curve model is arbitrage-free. Theoretically, the Nelson-Siegel model does not ensure the absence of arbitrage opportunities, as shown by Bjork and Christensen (1999) and Filipovic (1999). Still, central banks and wealth managers rely heavily on it. Using zero-coupon yield curve data from the US ma...
Article
Contenido: 1) Introducción; 2) Elementos esenciales de Matlab; 3) Preliminares de renta fija; 4) Medidas de riesgo y retorno; 5) Modelos de estructura temporal; 6) Asignación de activos; 7) Herramientas de Estadística; 8) Creación de la interfaz gráficas de usuario; 9) Fórmulas y expresiones útiles.
Article
In this paper we propose a new approach to modelling and estimating yield curves across multiple currency areas. The idea is that one area acts as the 'cardinal' economy by affecting the yield curve evolution in the other markets. To some extent, the yield curve factors of the 'cardinal economy' serve the role as global yield curve factors. The ado...
Article
This paper presents a new approach to recession prediction. The methodology relies on the shape of the yield curve alone and does not incorporate macroeconomic information or other explanatory variables. This makes the modelling framework less data intensive and more intuitive than other models that have the same goal. The workhorses of the approac...
Article
Full-text available
This paper presents a vector error-correction model that facilitates the gen-eration of long-term projections for exchange rates conditional upon yield curve movements, inflation and output gap. Our modeling framework draws on in-formation from the whole yield curve, as represented by the yield curve's level, slope and curvature. Using data from th...
Article
Full-text available
This report summarises the findings of the task force. It is organised as follows. Section 2 starts with a discussion of the relevance of credit risk for central banks. It is followed by a short introduction to credit risk models, parameters and systems in Section 3, focusing on models used by members of the task force. Section 4 presents the resul...
Article
Full-text available
This paper develops a new methodology for simulating fixed-income return distributions. It is shown that a traditional factor risk model, when augmented with reference returns, is capable of generating visually consistent return distributions for a broad range of fixed income instruments such as government and nongovernment instruments in the US do...
Article
Full-text available
This paper studies the implications of introducing an explicit policy objective to the management of foreign reserves at a central bank. A dynamic model is developed which links together reserves management and the exchange rate by foreign exchange interventions. The exchange rate is modelled as a mean-reverting autoregressive process incorporating...
Article
Full-text available
This paper presents a new framework allowing strategic investors to generate yield curve projections contingent on expectations about future macroeconomic scenarios. By consistently linking the shape and location of yield curves to the state of the economy our method generates predictions for the full yield-curve distribution under different assump...
Article
This paper presents an empirical model for inferring the private information content of trades at the transaction level. The trade-indicator model of Glosten and Harris (1988) is extended to a two-state regime-switching setting, and the model is estimated using tick-by-tick data from the New York Stock Exchange (NYSE). The specialist is found to re...
Article
Using a new empirical model, I estimate the probability of trades being generated by privately informed traders. Inference is drawn on a trade-by-trade basis using data samples from the New York Stock Exchange (NYSE). The modeling setup facilitates in-depth analysis of the estimated probability of informed trading at the intraday level and for stoc...
Article
Within a bivariate VAR model allowing for two-state Markov regime switching we test and evaluate the Expectations Theory (ET) of the term structure using Danish 1- and 3-months interest rates covering the period 1976-1997. A regime-shift approach is used in order to account for the change in monetary policy and the 1992-93 exchange rate crises that...
Article
In this paper the effective bid-ask spread is estimated using 12 high frequency Danish bond samples. A clear-cut MA(1)-model for the mean of the return series, and a GARCH(1,1)-model for the variance, are found. Basically, Roll's model is used, but three different methods of calculating the first-order autocovariance are suggested. Each of these in...
Article
This paper presents an empirical model for inferring the private information content of trades at the transaction level. The trade-indicator model of Glosten and Harris (1988) is extended to a two-state regime-switching setting, and the model is estimated using tick-by-tick data from the New York Stock Exchange (NYSE). The specialist is found to re...
Article
This paper evaluates 14 macroeconomic variables’ ability to forecast changes in monthly liquidity on the Scandinavian order-driven stock exchanges. Every macroeconomic variable is evaluated both out-of-sample and in-sample and against three different benchmark models of market variables and asymmetries concerning up and down markets. Policy rate on...

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