The gilt market: Models and model-based trading

The gilt market: Models and model-based trading

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Article ID: iaor1995165
Country: United Kingdom
Volume: 45
Issue: 4
Start Page Number: 392
End Page Number: 408
Publication Date: Apr 1994
Journal: Journal of the Operational Research Society
Authors: , ,
Abstract:

The construction of a model of the UK Government bond market, the gilts market, is described. The model uses discount functions, represented by low degree polynomials in the form of B splines, to estimate the theoretical price of each gilt. A demonstration of the use of the model for trading gilts is given and shown to be profitable. The gilt market is one of the more important fixed interest bond markets and the feasibility of extending the use of the model to other markets, for governmental bonds and eurobonds, is explored.

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