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Computing equilibrium bond prices in the Vayanos-Vila model

Fumio Hayashi

Research in Economics, 2018, vol. 72, issue 2, 181-195

Abstract: We develop tools for computing equilibrium bond prices for the discrete-time version of the Vayanos–Vila (2009) model. With the maturity structure included in pricing factors, factor loadings for equilibrium bond yields depends critically on parameters describing maturity structure dynamics and other model parameters. An illustrative example shows that the effect on the yield curve of a supply shock originating in a given maturity, although hump-shaped around the originating maturity, is to change yields broadly across all maturities.

Keywords: Vayanos–Vila model; Computation; Maturity structure; Yield curve; Risk premia (search for similar items in EconPapers)
JEL-codes: E43 E58 G12 (search for similar items in EconPapers)
Date: 2018
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DOI: 10.1016/j.rie.2018.04.003

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Handle: RePEc:eee:reecon:v:72:y:2018:i:2:p:181-195