We document a new risk premium in the Japanese yen that compensates for the policy uncertainty in Japan. The yen risk premium is implied from bond markets under the assumption of no-arbitrage. We estimate a regime switching term structure model and find that in Japan, the conventional monetary...

Equilibrium bond-pricing models rely on inflation being bad news for future growth to generate upward-sloping nominal yield curves. We develop a model that can generate upward-sloping nominal and real yield curves by instead using ambiguity about inflation and growth. Ambiguity can help resolve...

This paper investigates the power of macroeconomic factors to explain euro area bond risk premia using (i) a big dataset (ii) the Elastic Net variable selection. We find that macroeconomic factors, in particular economic activity and sentiment indicators, explain 40% of the variability of risk...

This paper investigates the power of macroeconomic factors to explain euro area bond risk premia using (i) a large dataset that captures the nowadays data-rich environment (ii) the Elastic Net variable selection. We find that macroeconomic factors, in particular economic activity and sentiment...

Some key features in the historical dynamics of U.S. Treasury bond yields-a trend in long-term yields, business cycle movements in short-term yields, and a level shift in yield spreads-pose serious challenges to existing equilibrium asset pricing models. This paper presents a new equilibrium...

We assess the impact of large-scale asset purchases, commonly known as quantitative easing (QE), conducted by Sveriges Riksbank and the European Central Bank (ECB) on bond risk premia in the Swedish government bond market. Using a novel arbitrage-free dynamic term structure model of nominal and...

Recent findings on the term structure of equity and bond yields pose serious challenges to existing models of equilibrium asset pricing. This paper presents a new equilibrium model of subjective expectations to explain the joint historical dynamics of equity and bond yields (and their yield...

We trace the evolution of extreme illiquidity discounts among Treasury securities during the financial crisis, when bond prices fell more than six percent below more-liquid but otherwise identical notes. Using high-resolution data on market quality and trader identities and characteristics, we...

In this paper we try to uncover the determinants of the 10-year Greek bond yield in both pre- and post-crisis period that caused the unprecedented event, in the recent history, a country, member of the Euro area, not to able to tap the market. In doing so, we employ two major set of variables,...

In this paper, we study the interplay between sovereign risk and global financial risk. We show that a substantial portion of the comovement among sovereign spreads is accounted for by changes in global financial risk. We construct bond-level sovereign spreads for dollar-denominated bonds issued...