A Non-Parametric Investigation of Risk Premia

Chiara Peroni ()

Studies in Nonlinear Dynamics & Econometrics, 2009, vol. 13, issue 4, 52

Abstract: This paper studies determinants of risk premia using a non-parametric term-structure model of the corporate spread. The model, which measures the extra return of defaultable corporate bonds on their government counterparts, involves the rate of inflation, a key macroeconomic variable that is found to explain the spread non-linearly. This study shows that non-linear methods are useful to investigate features of credit risk and that they give better results than their linear counterparts, enabling testing of affine term-structure specifications. The paper also shows how the non-linear model can be used to forecast the future course of the spread.

Date: 2009
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Related works:
Working Paper: A non-parametric investigation of risk premia (2009)
Working Paper: A non-parametric investigation of risk premia (2007)
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DOI: 10.2202/1558-3708.1617

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