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Monetary policy and mispricing in stock markets
Beckers, Benjamin; Bernoth, Kerstin - 2016
This paper investigates whether central banks can attenuate excessive mispricing in stocks as suggested by the … component, a risk premium, and a mispricing component. We argue that mispricing can arise for two reasons: (i) from false … policy shock is ambiguous in both the short- and long-run, and depends on the nature of the mispricing. Subsequently, we …
Persistent link: https://www.econbiz.de/10011527249
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Market conditions, default risk and credit spreads
Tang, Dragon Yongjun; Yan, Hong - 2008
This study empirically examine the impact of market conditions on credit spreads as motivated by recently developed structural credit risk models. Using credit default swap (CDS) spreads, we find that, in the time series, average credit spreads are decreasing in GDP growth rate, but increasing...
Persistent link: https://www.econbiz.de/10010295945
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On the tail risk premium in the oil market
Ellwanger, Reinhard - 2017
uncertainty measures, suggesting that time-varying oil price fears are an additional source of oil price volatility and …
Persistent link: https://www.econbiz.de/10012014454
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Ambiguity aversion and variance premium
Miao, Jianjun; Wei, Bin; Zhou, Hao - 2018
This paper offers an ambiguity-based interpretation of variance premium - the difference between risk-neutral and objective expectations of market return variance - as a compounding effect of both belief distortion and variance differential regarding the uncertain economic regimes. Our approach...
Persistent link: https://www.econbiz.de/10012030280
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What Option Prices tell us about the ECB's Unconventional Monetary Policies
Olijslagers, Stan; Petersen, Annelie; de Vette, Nander; … - 2018
We use a series of different approaches to extract information about crash risk from option prices for the Euro-Dollar exchange rate, with each step sharpening the focus on extracting more specific measures of crash risk around dates of ECB measures of Unconventional Monetary Policy. Several...
Persistent link: https://www.econbiz.de/10012114748
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Impact of macro shocks on sovereign default probabilities
Matsumura, Marco Shinobu - 2015
We use macro finance models to study the interaction between macro variables and the Brazilian sovereign yield curve using daily data. We calculate the model implied default probabilities and a measure of the impact of macro shocks on the probabilities. An extension of the Dai-Singleton...
Persistent link: https://www.econbiz.de/10012234186
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Comparing models for forecasting the yield curve
Matsumura, Marco Shinobu; Moreira, Ajax Reynaldo Bello - 2015
The evolution of the yields of different maturities is related and can be described by a reduced number of commom latent factors. Multifactor interest rate models of the finance literature, common factor models of the time series literature and others use this property. Each model has advantages...
Persistent link: https://www.econbiz.de/10012234187
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Ambiguity, long-run risks, and asset prices
Wei, Bin - 2021
I generalize the long-run risks (LRR) model of Bansal and Yaron (2004) by incorporating recursive smooth ambiguity aversion preferences from Klibanoff et al. (2005, 2009) and time-varying ambiguity. Relative to the Bansal-Yaron model, the generalized LRR model is as tractable but more flexible...
Persistent link: https://www.econbiz.de/10012818998
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What Fed funds futures tell us about monetary policy uncertainty
Fontaine, Jean-Sébastien - 2016
The uncertainty around future changes to the Federal Reserve target rate varies over time. In our results, the main … driver of uncertainty is a "path" factor signaling information about future policy actions, which is filtered from federal … funds futures data. The uncertainty is highest when it signals a loosening cycle. The uncertainty raises the risk premium in …
Persistent link: https://www.econbiz.de/10011756444
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Estimating the policy rule from money market rates when target rate changes are lumpy
Fontaine, Jean-Sébastien - 2012
Most central banks effect changes to their target or policy rate in discrete increments (e.g., multiples of 0.25%) following public announcements on scheduled dates. Still, for most applications, researchers rely on the assumption that the policy rate changes linearly with economic conditions...
Persistent link: https://www.econbiz.de/10010319661