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The Term Structure of Currency Carry Trade Risk Premia

Lustig, Hanno - 2013

Fixing the investment horizon, the returns to currency carry trades decrease as the maturity of the foreign bonds increases, because the local currency term premia offset the currency risk premia. The time series predictability of foreign bond returns in dollars similarly declines as the...

Persistent link: https://www.econbiz.de/10012459038

Interest Rate Uncertainty and Sovereign Default Risk

Johri, Alok - 2020

International data suggests that fluctuations in the level and volatility of the world interest rate (as measured by the US treasury bill rate) are positively correlated with both the level and volatility of sovereign spreads in emerging economies. We incorporate an estimated time-varying...

Persistent link: https://www.econbiz.de/10012481187

Is Maturity-Transformation Risk Priced into Bank Deposit Rates?

Fleckenstein, Matthias; Longstaff, Francis A. - National Bureau of Economic Research - 2024

We use the term structure of bank CD rates to examine whether maturity-transformation risk is priced into the rates banks offer customers. We find that depositors pay a significant cost for the liquidity provided by bank deposits. This cost is strongly related to the amount of...

Persistent link: https://www.econbiz.de/10014635687

High Yields : The Spread on German Interest Rates

Favero, Carlo - 1996

bonds between high yielders, namely Italy, Spain, Sweden and Germany. In particular we address the question of the relative …

Persistent link: https://www.econbiz.de/10012473456

Sovereign Risk Contagion

Arellano, Cristina - 2017

simultaneously and pay lower recoveries. We apply our model to the 2012 debt crises of Italy and Spain and show that it can replicate … the time path of spreads during the crises. In a counterfactual exercise, we find that the debt crisis in Spain (Italy …) can account for one-half (one-third) of the increase in the bond spreads of Italy (Spain) …

Persistent link: https://www.econbiz.de/10012453682

Linkages across Sovereign Debt Markets

Arellano, Cristina - 2013

We develop a multicountry model in which default in one country triggers default in other countries. Countries are linked to one another by borrowing from and renegotiating with common lenders with concave payoffs. A foreign default increases incentives to default at home because it makes new...

Persistent link: https://www.econbiz.de/10012459113

Facts and Challenges from the Great Recession for Forecasting and Macroeconomic Modeling

Ng, Serena - 2013

This paper provides a survey of business cycle facts, updated to take account of recent data. Emphasis is given to the Great Recession which was unlike most other post-war recessions in the US in being driven by deleveraging and financial market factors. We document how recessions with financial...

Persistent link: https://www.econbiz.de/10012459193

Testable Implications of Affine Term Structure Models

Hamilton, James D. - 2011

Affine term structure models have been used to address a wide range of questions in macroeconomics and finance. This paper investigates a number of their testable implications which have not previously been explored. We show that the assumption that certain specified yields are priced without...

Persistent link: https://www.econbiz.de/10012461726

An Empirical Analysis of the Swaption Cube

Trolle, Anders B. - 2010

We use a comprehensive database of inter-dealer quotes to conduct the first empirical analysis of the dynamics of the swaption cube. Using a model independent approach, we establish a set of stylized facts regarding the cross-sectional and time-series variation of conditional volatility and...

Persistent link: https://www.econbiz.de/10012462108

The Cross-Section and Time-Series of Stock and Bond Returns

Koijen, Ralph S.J. - 2010

Value stocks have higher exposure to innovations in the nominal bond risk premium, which measures the markets' perception of cyclical variation in future output growth, than growth stocks. The ICAPM then predicts a value risk premium provided that good news about future output lowers the...

Persistent link: https://www.econbiz.de/10012462964