Risk Premiums in Dynamic Term Structure Models with Unspanned Macro Risks

Scott Joslin, Marcel Priebsch and Kenneth Singleton

Journal of Finance, 2014, vol. 69, issue 3, 1197-1233

Abstract: type="main">

This paper quantifies how variation in economic activity and inflation in the United States influences the market prices of level, slope, and curvature risks in Treasury markets. We develop a novel arbitrage-free dynamic term structure model in which bond investment decisions are influenced by output and inflation risks that are unspanned by (imperfectly correlated with) information about the shape of the yield curve. Our model reveals that, between 1985 and 2007, these risks accounted for a large portion of the variation in forward terms premiums, and there was pronounced cyclical variation in the market prices of level and slope risks.

Date: 2014
References: Add references at CitEc
Citations: View citations in EconPapers (246)

Downloads: (external link)
http://hdl.handle.net/10.1111/jofi.12131 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:jfinan:v:69:y:2014:i:3:p:1197-1233

Ordering information: This journal article can be ordered from
http://www.afajof.org/membership/join.asp

Access Statistics for this article

More articles in Journal of Finance from American Finance Association Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().