We propose a new model to decompose inflation swaps into genuine inflation expectations and risk premiums. We develop a … long-run, economically-grounded, determinants, such as the equilibrium real interest rate and the inflation target. Our … estimations deliver new insights as to how macroeconomic variables affect market-based inflation expectation measures …

representing the short-term real interest rate, expected inflation, inflation's central tendency, and four volatility factors that … follow GARCH processes. We derive analytical solutions for nominal bond yields, yields on inflation-indexed bonds that have … an indexation lag, and the term structure of expected inflation. Unlike prior studies, the model's parameters are …

We propose a DSGE model with regime switching in the central bank's inflation target to explain inflation compensation … in the UK. Taking advantage of the well-documented change in UK monetary policy to adopt inflation targeting, we estimate … our model using nominal and inflation-linked Treasury bond data from the UK from 1985 to 2007. We find that this model can …

We revisit the concept of the cost of hedging inflation risks put forward in Bodie (1976). When doing so, we employ a …-varying compensation for expected and unexpected inflation shocks embedded in the sovereign bond yields of Germany, France, Japan and the … reflection of a low real risk-free rate, low inflation expectations and a low cost for hedging inflation risks. We have not …

We show that inflation risk is priced in stock returns and that inflation risk premia in the cross-section and the … quantities of inflation risk changing over time. Using a consumption-based asset pricing model, we argue that inflation risk is … priced because inflation predicts real consumption growth. The historical changes in this predictability and in stocks …

A no-arbitrage pricing model with inflation as the only priced risk factor explains the bond, equity, and value premia … observed in the United States over the past sixty years. Even though inflation is the only priced factor, in an economy with … three state variables -- inflation, the real rate, and corporate profitability -- the real rate and profitability play a …

The purpose of this paper is to study the compensation for inflation 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 … inflation risks from the perspective of a well diversified portfolio. This allows to disentangle the time-varying compensation …

This paper investigates the link between the perceived inflation risks in macroeconomic forecasts and the inflation … risk premia embodied in financial instruments. We first provide some stylized facts about the term structure of inflation … compensation, inflation expectations and inflation risk premia in the euro area bond market. Latent factor models like ours fit …

by modelling the time-varying dynamics of asset returns and inflation, and then estimating the cost of hedging in ation … inflation risks are not necessarily reduced with the inclusion of real estate assets in the minimum variance portfolio. Our … investors for holding the less attractive inflation-linked debt asset. …

generally find that deflation terms contributes negatively to such a premium and inflation positively. The magnitudes of the … coefficients associated with deflation tend to be greater, compared to those associated with inflation. This suggests that …