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The Term Structure of Real Interest Rates: Theory and Evidence from UK Index-Linked Bonds

Seppälä, Juha - Suomen Pankki - 2000

This paper studies the behavior of the default-risk-free real term structure and term premia in two general equilibrium endowment economies with complete markets but without money. In the first economy there are no frictions as in Lucas (1978) and in the second risk-sharing is limited by the...

Persistent link: https://www.econbiz.de/10005648948

A Simple Approach to the Estimation of Continuous Time CEV Stochastic Volatility Models of the Short-Term Rate

Fornari, Fabio; Mele, Antonio - Banca d'Italia - 2001

Aim of this article is to judge the empirical performance of 'ARCH models as diffusion approximations' of models of the short-term rate with stochastic volatility. Our estimation strategy is based both on moment conditions needed to guarantee the convergence of the discrete time models and on...

Persistent link: https://www.econbiz.de/10005113527

The Probability Density Function of Interest Rates Implied in the Price of Options

Fornari, Fabio; Violi, Roberto - Banca d'Italia - 1998

The paper contributes to the stochastic volatility literature by developing simulation schemes for the conditional distributions of the price of long term bonds and their variability based on non-standard distributional assumptions and volatility concepts; it illustrates the potential value of...

Persistent link: https://www.econbiz.de/10005111555

A beta based framework for (lower) bond risk premia.

Nobili, Stefano; Palazzo, Gerardo - Banca d'Italia - 2008

-year government bond yields. In line with the existing literature, we find that estimated premia have followed a downward trend since … the 1980s: from 4.9 per cent in 1981 to 0.7 per cent in 2006 for the US bond and from 3.3 to 0.5 per cent for the German … year horizon. Long-term return expectations for ten-year government bonds will have to incorporate bond risk premia that …

Persistent link: https://www.econbiz.de/10005609332

Monetary policy and rejections of the expectations hypothesis

Ravenna, Federico; Seppälä, Juha - Suomen Pankki - 2006

We study the rejection of the expectations hypothesis within a New Keynesian business cycle model. Earlier research has shown that the Lucas general equilibrium asset pricing model can account for neither sign nor magnitude of average risk premia in forward prices, and is unable to explain...

Persistent link: https://www.econbiz.de/10005648886

Monetary policy, expected inflation and inflation risk premia

Ravenna, Federico; Seppälä, Juha - Suomen Pankki - 2007

Within a New Keynesian business cycle model, we study variables that are normally unobservable but are very important for the conduct of monetary policy, namely expected inflation and inflation risk premia. We solve the model using a third-order approximation that allows us to study time-varying...

Persistent link: https://www.econbiz.de/10005648925

A continuous-time model of the term structure of interest rates with fiscal-monetary policy interactions

Marzo, Massimiliano; Romagnoli, Silvia; Zagaglia, Paolo - Suomen Pankki - 2008

We study the term structure implications of the fiscal theory of price level determination. We introduce the intertemporal budget constraint of the government in a general equilibrium model in continuous time. Fiscal policy is set according to a simple rule whereby taxes react proportionally to...

Persistent link: https://www.econbiz.de/10005648966

Recent estimates of sovereign risk premia for euro-area countries

Cesare, Antonio Di; Grande, Giuseppe; Manna, Michele; … - Banca d'Italia - 2012

This paper examines the recent behavior of sovereign interest rates in the euro area, focusing on the 10 year yield spreads relative to Germany for Italy and other euro area countries. Both previous analyses and the new evidence presented in the paper suggest that, in recent months, for several...

Persistent link: https://www.econbiz.de/10011100417

The interest-rate sensitivity of the demand for sovereign debt. Evidence from OECD countries (1995-2011)

Grande, Giuseppe; Masciantonio, Sergio; Tiseno, Andrea - Banca d'Italia - 2014

Public debt levels in advanced economies have increased dramatically over recent years and they could put considerable upward pressure on market yields. Using a novel identification approach based on financial accounts and focusing on panel regressions for 18 advanced economies over the period...

Persistent link: https://www.econbiz.de/10011105131

The Probability Density Function of Interest Rates Implied in the Price of Options.

Fornari, F.; Violi, R. - Banca d'Italia - 1998

Persistent link: https://www.econbiz.de/10005671394

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