We introduce the class of linear-rational term structure models in which the state price density is modeled such that bond prices become linear-rational functions of the factors. This class is highly tractable with several distinct advantages: i) ensures nonnegative interest rates, ii) easily...

With interest rates near the zero lower bound, I propose a simple framework to indicate the monetary policy stance as a “shadow short rate”. I apply a one-factor model to Japan, provide associated economic intuition, and discuss multiple-factor extensions.

The paper investigates the information content of yield curves regarding future inflation, using the example of the G-7 countries. The empirical results show substantial variation of results across countries, and a significant information content is identified for the United States, the United...

This paper shows that foreign term spreads constructed from bond yields of non-U.S. G-7 constituents predict future U.S. recessions and that foreign term spreads are stronger predictors of U.S. recessions occurring within the next year than U.S. term spreads. U.S. and foreign term spreads are...

In this paper, I study risk-neutral probability densities regarding future Libor rates denominated in British pounds, euros, and US dollars as implied by option prices. I apply Breeden and Litzenberger's (1978) result regarding the relationship between option prices and implied probabilities for...

This chapter surveys the literature on fixed-income pricing models, including dynamic term-structure models, and interest-rate sensitive, derivative pricing models. Our overview of conceptual approaches highlights the tradeoffs that have emerged between the complexity of the probability model...

The links between real and nominal bond risk premia and macroeconomic dynamics are explored quantitatively in a model with nominal rigidities and monetary policy. The estimated model captures macroeconomic and yield curve properties of the U.S. economy, implying significantly positive real term...

4207 This paper investigates the impact of European Central Bank's unconventional monetary policies between 2008-2016 on the government bond yields of eight European Monetary Union countries and up to eleven different maturities. In identifying this impact, it adopts a novel econometric...