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...

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...

In this paper we estimate and interpret the factors that jointly determine bond returns of different maturities in the US, Germany and Japan. We analyze both currency-hedged as well as unhedged bond returns. For currency-hedged bond returns, we find that five factors explain 96.5% of the...

Cochrane and Piazzesi (2005) show that (i) lagged forward rates improve the predictability of annual bond returns, adding to current forward rates, and that (ii) a Markovian model for monthly forward rates cannot generate the pattern of predictability in annual returns. These results stand as a...

I provide evidence that risks in macroeconomic fundamentals contain valuable information about bond risk premia. I extract factors from a set of quantile-based risk measures estimated for US macroeconomic variables and document that they account for up to 31% of the variation in excess bond...

Bond excess returns can be predicted by macro factors, however, large parts remain still unexplained. We apply a novel term structure model to decompose bond excess returns into expected excess returns (risk premia) and the unexpected part. In order to explore these risk premia and innovations,...

In this paper, we examine the forecasting ability of an affine term structure framework that jointly models the markets for Treasuries, inflation-protected securities, inflation derivatives, and oil future prices based on no-arbitrage restrictions across these markets. On the methodological...

Market liquidity and market making – the case of fixed income and low interest rates Market liquidity has received a lot of attention lately, especially in fixed-income markets. This paper studies the determinants of market liquidity in a theoretical model for market making with inventory...