Abstract

This article proposes an algorithm for forecasting benchmark prices in the markets – price targets, an example of forecasting the average interest rate of BID on the interbank credit market of Ukraine for operations in the national currency for a period of 1 month. For the calculation, data for October-November 2015 and May-June 2016 were adopted, since during these periods a sharp and predictable change in this rate was observed. The results of calculations showed that the proposed approach to the forecast of interest rates on the interbank market should be used when forecasting price dynamics in other markets – benchmark prices.

Keywords: banks services pricing, pricing method, market – price reference point, combined method of pricing.

JEL Classification: G12, G13, G21.

Cite as: Williams, G., Kotliarevskyi, O. (2017). Forecasting the price dynamics in the markets − benchmark prices (using the example of the interbank credit market and the bond market). Financial Markets, Institutions and Risks, 1(2), 50-59. http://doi.org/10.21272/fmir.1(2).50-59.2017.

References

1. Blanchard, A. The Two-Factor Hull-White Model: Pricing and Calibration of Interest Rates Derivatives.
2. Björk, T. (2005) Arbitrage Theory in Continuous Time, Oxford Finance.
3. Brigo, D. and Mercurio, F. (2006). Interest Rate Models: Theory and Practice − with Smile, Inflation and Credit. Springer-Verlag, (2nd ed.).
4. Chris Strickland (1996). A comparison of models for pricing interest rate derivative securities. The European Journal of Finance, 2(3), 261-287.
5. Cox, J. C., J. E. Ingersoll, and S. A. Ross (1985). A Theory of the Term Structure of Interest Rates, Econometrica, 53, 385-467.
6. Jamshidian, F. (1997) LIBOR and swap market models and measures. Finance Stochast., 1, 293–330.
7. John Hull and Alan White (1990). Pricing interest-rate derivative securities. The Review of Financial Studies, 3(4), 573–592.
8. John Hull and Alan White (June 1993). One factor interest rate models and the valuation of interest rate derivative securities. Journal of Financial and Quantitative Analysis, 28(2), 235–254.
9. Musiela, M., Rutkowski, M. (1997). Continuous-time term structure models: Forward measure approach. Finance Stochast. 1, 259–289.
10. Vasicek, O. A. (1977). An Equilibrium Characterization of the Term Structure. Journal of Financial Economics, 5, 177-188.