In this study, we forecast the term structure of EURIBOR swap rates by means of rolling vector autoregressive (VAR) models. In advance, a principal component analysis (PCA) is adopted to reduce the dimensionality of the term structure. To statistically assess the forecasting performance for...

We find that interest rate variance risk premium (IRVRP) - the difference between implied and realized variances of interest rates - is a strong predictor of U.S. Treasury bond returns of maturities ranging between one and ten years for return horizons up to six months. IRVRP is not subsumed by...