EBookClubs

Read Books & Download eBooks Full Online

EBookClubs

Read Books & Download eBooks Full Online

Book Modeling Time Variation of Risk Premia in the Term Structure of Interest Rates

Download or read book Modeling Time Variation of Risk Premia in the Term Structure of Interest Rates written by Jill M. Jacobs and published by . This book was released on 1993 with total page 248 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Book Risk Premia in the Term Structure of Interest Rates

Download or read book Risk Premia in the Term Structure of Interest Rates written by Dennis Bams and published by . This book was released on 2000 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Book Sources of Time Varying Risk Premia in the Term Structure

Download or read book Sources of Time Varying Risk Premia in the Term Structure written by John Elder and published by . This book was released on 2008 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates the extent to which observable macroeconomic factors can explain the time-varying risk premia in the short-end of the term structure. The empirical model we employ is motivated by a dynamic asset pricing model with time-invariant reward-to-risk measures and time-varying risk premia. Our results indicate that two factors, based innovations in the federal funds rate and shifts in the yield curve, explain up to 65% of the temporal variation in Treasury bill returns. We also find that shifts in the yield curve factor may explain some time-variation in risk premia at the very short end of the term structure, and that the federal funds rate factor may be weakly linked to the time-varying risk premia over the post-1966 sample, when the federal funds market first began to function as a major source of bank liquidity. This latter result, however, is somewhat sensitive to the sample period.

Book Rare Disasters and the Term Structure of Interest Rates

Download or read book Rare Disasters and the Term Structure of Interest Rates written by Jerry Tsai and published by . This book was released on 2015 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper offers an explanation for the properties of the nominal term structure of interest rates and time-varying bond risk premia based on a model with rare consumption disaster risk. In the model, consumption is subject to large negative jumps (disasters), and these disasters are sometimes accompanied by period of high inflations. The possibility of jumps in inflation during disasters increases nominal yields and yield spread, while time-variation in disaster probability drives time-varying bond risk premia. This model also generates realistic implications for the aggregate stock market, and on the interaction between the two markets.

Book Retrieving Inflation Expectations and Risk Premia Effects from the Term Structure of Interest Rates

Download or read book Retrieving Inflation Expectations and Risk Premia Effects from the Term Structure of Interest Rates written by Efthymios Argyropoulos and published by . This book was released on 2014 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper suggests an empirically attractive Gaussian dynamic term structure model to retrieve estimates of real interest rates and in፟lation expectations from the nominal term structure of interest rates which are net of in፟lation risk premium effects. The paper shows that this model is consistent with the data and that time-variation of inflፚtion risk premium and real interest rates can explain the puzzling behavior of the spread between long and short-term nominal interest rates to forecast changes in in፟lation rates, especially over short-term horizons. The estimates of in፟lation risk premium effects retrieved by the model tend to be negative and signiጿicant, which implies that investors in the bond market require less compensation for holding nominal bonds compared to in፟lation-indexed bonds. This is more evident during the recent fiijnancial crisis.

Book Expectation Puzzles Time varying Risk Premia and Dynamic Models of the Term Structure

Download or read book Expectation Puzzles Time varying Risk Premia and Dynamic Models of the Term Structure written by Qiang Dai and published by . This book was released on 2001 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: Though linear projections of returns on the slope of the yield curve have contradicted the implications of the traditional expectations theory, ' we show that these findings are not puzzling relative to a large class of richer dynamic term structure models. Specifically, we are able to match all of the key empirical findings reported by Fama and Bliss and Campbell and Shiller, among others, within large subclasses of affine and quadratic-Gaussian term structure models. Additionally, we show that certain risk-premium adjusted' projections of changes in yields on the slope of the yield curve recover the coefficients of unity predicted by the models. Key to this matching are parameterizations of the market prices of risk that let the risk factors affect the market prices of risk directly, and not only through the factor volatilities. The risk premiums have a simple form consistent with Fama's findings on the predictability of forward rates, and are shown to also be consistent with interest rate, feedback rules used by a monetary authority in setting monetary policy

Book Stock Returns and the Term Structure

Download or read book Stock Returns and the Term Structure written by John Y. Campbell and published by . This book was released on 1985 with total page 66 pages. Available in PDF, EPUB and Kindle. Book excerpt: It is well known that in the postwar period stockreturns have tended to be low when the short term nominal interest rate is high. In this paper I show that more generally the state of the term structure of interest rates predicts stock returns. Risk premia on stocks appear to move closely together with those on 20-year Treasury bonds, while risk premia on Treasury bills move somewhat independently. Average returns on 20-year bonds have been very low relative to average returns on stocks. I use these observations to test some simple asset pricing models. First I consider latent variable models in which betas are constant and risk premia vary with expected returns on a small number of unobservable hedge portfolios. The data strongly reject a single-latent-variable model. The last part of the paper examines the relationship between conditional means and variances of returns on bills, bonds and stocks. Bill returns tend to be high when their conditional variance is high, but there is a perverse negative relationship between stock returns and their conditional variance. A model is estimated which assumes that asset returns are determined by their time-varying betas with a fixed-weight "benchmark" portfolio of bills, bonds and stocks, whose return is proportional to its conditional variance. This portfolio is estimated to place almost all its weight on bills, indicating that uncertainty about nominal interest rates is important in pricing both short- and long-term assets

Book Expectations Puzzle Time Varying Risk Premia and Dynamic Models of the Term Structure

Download or read book Expectations Puzzle Time Varying Risk Premia and Dynamic Models of the Term Structure written by Qiang Dai and published by . This book was released on 2001 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: Though linear projections of returns on the slope of the yield curve have contradicted the implications of the traditional quot;expectations theory,quot; we show that these findings are not puzzling relative to a large class of richer dynamic term structure models. Specifically, we are able to match all of the key empirical findings reported by Fama and Bliss and Campbell and Shiller, among others, within large subclasses of affine and quadratic-Gaussian term structure models. Key to this matching are parameterizations of the market prices of risk that let us separately quot;controlquot; the shape of the mean yield curve and the correlation structure of excess returns with the slope of the yield curve. The risk premiums have a simple form consistent with Fama's findings on the predictability of forward rates, and are shown to also be consistent with interest rate, feedback rules used by a monetary authority in setting monetary policy.

Book A Monetary Explanation of the Term Structure of Interest Rates and Bond Risk Premia

Download or read book A Monetary Explanation of the Term Structure of Interest Rates and Bond Risk Premia written by Hwagyun Kim and published by . This book was released on 2011 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper presents a monetary model of the term structure of interest rates. This model is intended to explain the stylized facts in Treasury yields including counter cyclical variations of bond risk premia without challenging both short-run and long-run monetary facts. To this end, we study the roles of a segmented asset market, habit formation, and inflation targeting in a cash-in-advance model. We provide a monetary general equilibrium justification of an affine term structure model with a flexible market price of risk. Quantitative results show that the model can capture the features in the nominal term structure.

Book Volatility and Jump Risk Premia in Emerging Market Bonds

Download or read book Volatility and Jump Risk Premia in Emerging Market Bonds written by John Matovu and published by International Monetary Fund. This book was released on 2007-07 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: There is strong evidence that interest rates and bond yield movements exhibit both stochastic volatility and unanticipated jumps. The presence of frequent jumps makes it natural to ask whether there is a premium for jump risk embedded in observed bond yields. This paper identifies a class of jump-diffusion models that are successful in approximating the term structure of interest rates of emerging markets. The parameters of the term structure of interest rates are reconciled with the associated bond yields by estimating the volatility and jump risk premia in highly volatile markets. Using the simulated method of moments (SMM), results suggest that all variants of models which do not take into account stochastic volatility and unanticipated jumps cannot generate the non-normalities consistent with the observed interest rates. Jumps occur (8,10) times a year in Argentina and Brazil, respectively. The size and variance of these jumps is also of statistical significance.

Book Inflation Risk Premia in the Term Structure of Interest Rates

Download or read book Inflation Risk Premia in the Term Structure of Interest Rates written by Peter Hördahl and published by . This book was released on 2007 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt: "This paper estimates the size and dynamics of inflation risk premia in the euro area, based on a joint model of macroeconomic and term structure dynamics. Information from both nominal and index-linked yields is used in the empirical analysis. Our results indicate that term premia in the euro area yield curve reflect predominantly real risks, i.e. risks which affect the returns on both nominal and index-linked bonds. On average, inflation risk premia were negligible during the EMU period but occasionally subject to statistically significant fluctuations in 2004-2006. Movements in the raw break-even rate appear to have mostly reflected such variations in inflation risk premia, while long-term inflation expectations have remained remarkably anchored from 1999 to date." - - Abstract.

Book Expectation Puzzles Time Varying Risk Premia and Dynamic Models of the Term Structure

Download or read book Expectation Puzzles Time Varying Risk Premia and Dynamic Models of the Term Structure written by Qiang Dai and published by . This book was released on 2008 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: Though linear projections of returns on the slope of the yield curve have contradicted the implications of the traditional quot;expectations theory,quot; we show that these findings are not puzzling relative to a large class of richer dynamic terms structure models. Specifically, we are able to match all of the key empirical findings reported by Fama and Bliss and Campbell and Shiller, among others, within large subclasses of affine and quadractic-Gaussian term structure models. Key to this matching are parameterizations of the market prices of risk that let us separately quot;controlquot; the shape of the mean yield curve and the correlation structure of excess returns with the slope of the yield curve. The risk premiums have a simple form consistent with Fama's findings on the predictability of forward rates, and are shown to also be consistent with interest rate, feedback rules used by a monetary authority in setting monetary policy.

Book The Term Structure of Interest Rates and Macro Portfolio Returns

Download or read book The Term Structure of Interest Rates and Macro Portfolio Returns written by Paul A. Bekker and published by . This book was released on 2011 with total page 47 pages. Available in PDF, EPUB and Kindle. Book excerpt: The paper presents an arbitrage-free yield model based on macro-portfolio dynamics. Apart from a level factor, detrended portfolio values serve as factors for the yield model. Using trend-balanced portfolios and parameters in terms of the instantaneous mean-variance frontier, risk premia and yield curve dynamics are modeled in a natural, integrated, parsimonious way. Positivity constraints on parameters and factors are formulated that guarantee the model is well posed. In an empirical analysis a four-factor model is applied to daily US Treasury yields. We estimate by quasi-maximum likelihood using the unscented Kalman filter. The model fits well, while the estimates of both parameters and factors satisfy the positivity constraints. The analysis reveals a strong link between business cycle variation in yields and risk premia.