Investors seek to hedge against interest rate risk by taking long or short positions on bonds ofdifferent maturities. We study changes in risk taking behavior in a low interest rateenvironment by estimating a market stochastic discount factor that is non-linear and thereforeconsistent with the...

The way central banks manage their foreign reserve assets has evolved over the past decades. One major trend is managing reserves in two or more tranches-liquidity tranche and investment tranche-especially for those with adequate reserves. Incorporating reserve tranching, we have developed in...

We isolate a U.S. dollar currency premium by comparing corporate bonds issued in the dollar and the euro by firms o utside t he U .S. a nd e uro a rea. We make s everal empirical observations that dissect the perceived advantage of borrowing in the dollar. First, while the dollar dominates...

Are Bunds special? This paper estimates the 'Bund premium' as the difference in convenience yields between other sovereign safe assets and German government bonds adjusted for sovereign credit risk, liquidity and swap market frictions. A higher premium suggests less substitutability of sovereign...

This paper examines the determinants of sub-national governments risk premia using secondary market data for U.S., Canada, Australia and Germany. It finds that, as for central governments, fiscal fundamentals matter in the pricing of risk premia, and sub-national governments with higher public...

What determines the ability of low-income developing countries to issue bonds in international capital and what explains the spreads on these bonds? This paper examines these questions using a dataset that includes emerging markets and developing economies (EMDEs) that issued sovereign bonds at...

We analyze how concerns for model misspecification on the part of international lenders affect the desirability of issuing state-contingent debt instruments in a standard sovereign default model à la Eaton and Gersovitz (1981). We show that for the commonly used threshold state-contingent bond...

This paper presents and discusses the estimates of the present value of corporate profits in the United States from 1984 to 2018. To value the expected income stream, it uses the long-range forecasts of professional forecasters for pre-tax corporate earnings and long-term Treasury note yields,...

This paper constructs a financial conditions index for Poland to explore the link between financial conditions and real economic activity. The index in constructed by applying two complementary approaches — factor analysis and vector auto-regression approach. We evaluate the index's...

Inflation has been below the Federal Reserve's target for much of the past 20 years, creating worries that inflation may be deanchoring from the FOMC's target. This paper uses a factor model that incorporates information from professional forecasters, household and business surveys, and the...