Canonical term-structure models with observable factors and the dynamics of bond risk premiums

We study the dynamics of risk premiums on the German bond market, employing no-arbitrage term-structure models with both observable and unobservable state variables, recently popularized by Ang and Piazzesi (2003). We conduct a specification analisys based on a new canonical representation for this class of models. We find that risk premiums display a considerable variability over time, are strongly counter-cyclical and bear no significant relation to inflation.

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Year of publication:	2006-02
Authors:	Pericoli, Marcello ; Taboga, Marco
Institutions:	Banca d'Italia
Subject:	term structure models \| yield curve \| risk premium

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Extent:	application/pdf
Series:	Temi di discussione (Economic working papers).
Type of publication:	Book / Working Paper
Language:	English
Notes:	Number 580
Classification:	C5 - Econometric Modeling ; G1 - General Financial Markets
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005113607