Inflation Fisher Equation And The Term Structure Of Inflation Risk Premia
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Inflation Fisher Equation And The Term Structure Of Inflation Risk Premia
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Author : Ren-Raw Chen
language : en
Publisher:
Release Date : 2010
Inflation Fisher Equation And The Term Structure Of Inflation Risk Premia written by Ren-Raw Chen and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2010 with categories.
In this paper, we study inflation risk and the term structure of inflation risk premia in the U.S. nominal interest rates through the Treasury Inflation Protection Securities (TIPS) and an analytical two-factor Cox-Ingersoll-Ross (CIR) model with correlated real rate and inflation. The analytical formula facilitates the estimation of the model parameters and improves the accuracy of the valuation of nominal rates and TIPS, and especially enables us to estimate the term structure of inflation risk premia.We use the two-factor model to evaluate the inflation-index bonds and study the relationship between the real rate and the expected inflation rate implied by the nominal Constant Maturity Treasury (CMT) rates for the period of January 1998 through December 2004. We use the Unscented Kalman Filter (UKF) to estimate the model and the inflation risk premium. The empirical evidence indicates that the expected inflation rate, as opposed to those derived from the consumer price indexes, is very stable and the inflation risk premia demonstrate a steep term structure.
Two Essays In Financial Economics
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Author : Bo Liu
language : en
Publisher:
Release Date : 2006
Two Essays In Financial Economics written by Bo Liu and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2006 with Mutual funds categories.
Inflation Risk Premia In The Term Structure Of Interest Rates
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Author : Peter Hördahl
language : en
Publisher:
Release Date : 2007
Inflation Risk Premia In The Term Structure Of Interest Rates written by Peter Hördahl and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2007 with Banks and banking, Central categories.
"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.
Estimating Parameters Of Short Term Real Interest Rate Models
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Author : Mr.Vadim Khramov
language : en
Publisher: International Monetary Fund
Release Date : 2013-10-17
Estimating Parameters Of Short Term Real Interest Rate Models written by Mr.Vadim Khramov and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013-10-17 with Business & Economics categories.
This paper sheds light on a narrow but crucial question in finance: What should be the parameters of a model of the short-term real interest rate? Although models for the nominal interest rate are well studied and estimated, dynamics of the real interest rate are rarely explored. Simple ad hoc processes for the short-term real interest rate are usually assumed as building blocks for more sophisticated models. In this paper, parameters of the real interest rate model are estimated in the broad class of single-factor interest rate diffusion processes on U.S. monthly data. It is shown that the elasticity of interest rate volatility—the relationship between the volatility of changes in the interest rate and its level—plays a crucial role in explaining real interest rate dynamics. The empirical estimates of the elasticity of the real interest rate volatility are found to be about 0.5, much lower than that of the nominal interest rate. These estimates show that the square root process, as in the Cox-Ingersoll-Ross model, provides a good characterization of the short-term real interest rate process.
The Term Structure Of Real Rates And Expected Inflation
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Author : Andrew Ang
language : en
Publisher:
Release Date : 2007
The Term Structure Of Real Rates And Expected Inflation written by Andrew Ang and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2007 with Economic forecasting categories.
Changes in nominal interest rates must be due to either movements in real interest rates, expected inflation, or the inflation risk premium. We develop a term structure model with regime switches, time-varying prices of risk, and inflation to identify these components of the nominal yield curve. We find that the unconditional real rate curve in the U.S. is fairly flat around 1.3%. In one real rate regime, the real term structure is steeply downward sloping. An inflation risk premium that increases with maturity fully accounts for the generally upward sloping nominal term structure.
The Information Content Of The Term Structure Of Interest Rates
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Author : Frank Browne
language : en
Publisher: [Paris, France] : OECD, Department of Economics and Statistics
Release Date : 1989
The Information Content Of The Term Structure Of Interest Rates written by Frank Browne and has been published by [Paris, France] : OECD, Department of Economics and Statistics this book supported file pdf, txt, epub, kindle and other format this book has been release on 1989 with Inflation (Finance) categories.
Inflation Risk Premia In The Term Structure Of Interest
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Author : Peter Hördahl
language : en
Publisher:
Release Date : 2007
Inflation Risk Premia In The Term Structure Of Interest written by Peter Hördahl and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2007 with Interest rates categories.
An Estimate Of The Inflation Risk Premium Using A Three Factor Affine Term Structure Model
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Author : J. Benson Durham
language : en
Publisher:
Release Date : 2006
An Estimate Of The Inflation Risk Premium Using A Three Factor Affine Term Structure Model written by J. Benson Durham and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2006 with Interest rates categories.
Indexed Bonds And Monetary Policy
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Author : Yukinobu Kitamura
language : en
Publisher:
Release Date : 1996
Indexed Bonds And Monetary Policy written by Yukinobu Kitamura and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1996 with Bonds categories.
A Macroeconomic Approach To The Term Premium
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Author : Emanuel Kopp
language : en
Publisher: International Monetary Fund
Release Date : 2018-06-15
A Macroeconomic Approach To The Term Premium written by Emanuel Kopp and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018-06-15 with Business & Economics categories.
In recent years, term premia have been very low and sometimes even negative. Now, with the United States economy growing above potential, inflationary pressures are on the rise. Term premia are very sensitive to the expected future path of growth, inflation, and monetary policy, and an inflation surprise could require monetary policy to tighten faster than anticipated, inducing to a sudden decompression of term and other risk premia, thus tightening financial conditions. This paper proposes a semi-structural dynamic term structure model augmented with macroeconomic factors to include cyclical dynamics with a focus on medium- to long-run forecasts. Our results clearly show that a macroeconomic approach is warranted: While term premium estimates are in line with those from other studies, we provide (i) plausible, stable estimates of expected long-term interest rates and (ii) forecasts of short- and long-term interest rates as well as cyclical macroeconomic variables that are stunningly close to those generated from large-scale macroeconomic models.