International Journal of Bonds and Derivatives (4 papers in press)

Regular Issues

• The dynamic relationship between the bond and CDS markets of emerging countries: Copula-GARCH  
  by Imen Daoued, Mohamed Imen Gallali 
  Abstract: This paper examines the interaction between sovereign bond credit spreads and CDS premiums. We use ARDL models to test whether there is a long-run equilibrium relationship between the variables, using daily data for the period October 2008 to November 2016 for 22 emerging market countries. To analyze the validity of the results of the Granger causality test, a test of the static copula model was applied to measure the interdependence of the variables. The empirical literature on copula and their use in financial dependence is extensive (see Joe H., Li H., Nikololopoulos (2012)), and they provide a new, alternative measurement technique.
  Keywords: ARDL-ECM • Lead-lag • Statics Copula • Sovereign Bond Credit SPREADS• CDS premiums. Price discovery. Emerging Markets. Flight to quality. Basis CDS-BCS. Positive base. Negative base. Arbitrage. The unidirectional relationship. The bidirectional relationship.
  
  
• Green Bonds in Focus: Bridging Literacy and Investment Among Retail Investors  
  by Kritika Pancholi, Ajay Trivedi, Vandana Lakhotia Ladha 
  Abstract: This study examines the influence of green bond awareness and comprehension on the investment decisions of Indian retail investors and its alignment with sustainable development goals. Utilising a mixed-methods approach, the research combines quantitative survey data analysis and qualitative article content analysis in SPSS to assess investor awareness and inclination towards green bond investments. Findings reveal that financial literacy mitigates behavioural biases, showing a positive correlation between awareness and investment in green bonds. Risk perception and trust in green bond credibility are key influencers. Financial literacy is pivotal in promoting green bond investments among Indian retail investors, suggesting the need for educational programs and policy innovations to enhance the green bond market. Further exploration of these dynamics is recommended.
  Keywords: Green Bonds; Indian Retail Investors; Behavioural Finance; Financial Literacy; Sustainable Development Goals (SDGs).
  DOI: 10.1504/IJBD.2024.10069440
   
  
• Forecasting the Yield Curve for the Eurozone and United States using Standard Methods and Machine Learning Approach  
  by Zrinka Orlovic, Jura Jurcevic, Davor Zoricic 
  Abstract: This paper investigates forecasting yield curve parameters using the Svensson model for the Eurozone and US markets, applying random walk, autoregressive, vector autoregression, and random forest models. Forecast accuracy was assessed using root mean square error over 1-day, 6-day, and 12-day horizons, and performance was compared using the Diebold-Mariano test. Results indicate that the random walk model consistently provided the most accurate forecasts, particularly for the level and slope of the yield curve. Autoregressive and vector autoregression models performed well for short-term forecasts, while random forest showed mixed results with competitive accuracy in certain cases but higher overall errors. The Diebold-Mariano test confirmed the superiority of the random walk model, especially for longer-term forecasts. Overall, random walk is a robust base model for longer-term forecasts, while other models contribute to short-term predictions, with random forest showing potential for further improvement.
  Keywords: Yield curve; Svensson model; Random forest; Machine learning; Random walk; Autoregressive model; Vector autoregression model; Forecasting; Eurozone; United States; Diebold-Mariano test.
  DOI: 10.1504/IJBD.2025.10070739
   
  
• Pricing Longevity Bonds using a Generalised Vasicek Term Structure Model with Correlated Mortality and Interest Rates  
  by Georgina Onuma Kalu, Dennis C. Ikpe, Ben Oruh 
  Abstract: Longevity risk, defined as the possibility that individuals live longer than anticipated, presents substantial challenges for pension funds and annuity providers. This risk can increase financial liabilities, as the actual pay out obligations may exceed initial projections. To address this issue, this study proposes a novel pricing approach for zero-coupon longevity bonds. The methodology employs a generalised Vasicek term structure model, effectively capturing the intricate relationship between mortality and interest rates. This model extends the classical one-factor affine Vasicek framework by jointly modelling the dynamics of the instantaneous forward mortality rate and the instantaneous interest rate within a state space context. The application of this model allows for more accurate pricing of longevity bonds, facilitating better risk management for pension funds and annuity providers. By accounting for the correlation between mortality and interest rates. The findings underscore the importance of sophisticated modelling techniques in managing longevity risk. The results indicate that traditional methods may inadequately capture the complexities involved in pricing longevity-linked securities.
  Keywords: Zero-coupon longevity bond; Longevity risk; Pension fund; Annuity providers; Financial liabilities.
  DOI: 10.1504/IJBD.2025.10072118