The purpose of this paper is to study the compensation for in ation risks priced in sovereign bond yields. And we do so by modelling the time-varying dynamics of asset returns and inflation, and then estimating the cost of hedging in ation risks from the perspective of a well diversified...

Households face earnings risk which is non-normal and varies by age and over the income distribution. We show that allowing for these rich features of earnings dynamics, in the context of a structurally estimated life-cycle portfolio choice model, helps to rationalize the limited participation...

I develop and test a model explaining the gradual price decrease observed in the days leading up to anticipated asset sales such as Treasury auctions. In the model, risk-averse investors expect an uncertain increase in the net supply of a risky asset. They face a trade-off between hedging the...

Based on a Financial Almost Ideal Demand System (FAIDS), this paper investigates the wealth structure of German households. The long-run wealth elasticities and interestrate elasticities were calculated using a unique new quarterly financial accounts macrodata set which covers the period from...

Recent policy discussion includes the introduction of diversification requirements for sovereign bond portfolios of European banks. In this paper, we evaluate the possible effects of these constraints on risk and diversification in the sovereign bond portfolios of the major European banks....

We construct a novel measure of bank performance, investigate its determinants, and show that it affects bank resilience, lending behaviour and real outcomes. Using confidential and granular data, we measure performance against a market-based benchmark portfolio that mimics individual banks'...

We estimate time-varying expected excess returns on the US stock market from 1983 to 2008 using a model that jointly captures the arbitrage-free dynamics of stock returns and nominal bond yields. The model nests the class of affine term structure (of interest rates) models. Stock returns and...

This paper uses a dynamic panel approach to explain the determinants of widening sovereign bond yield spreads vis-à-vis Germany in selected euro area countries during the period end-July 2007 to end-March 2009, when the financial turmoil developed into a full-blown financial and economic...

There is strong evidence that on-the-run U.S. Treasury securities trade much more liquidly and at significantly higher prices than their off-the-run counterparts. We examine if the same phenomenon is present in the German government bond market whose market structure differ markedly from that of...

We build a novel macro-finance model that combines a semi-structural macroeconomic module with arbitrage-free yield-curve dynamics. We estimate it for the United States and the euro area using a Bayesian approach and jointly infer the real equilibrium interest rate (r*), trend inflation (π*),...