Canonical term-structure models with observable factors and the dynamics of bond risk premiums

Marcello Pericoli and Marco Taboga ()
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Marco Taboga: Banca d�Italia

No 580, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: We study the dynamics of risk premiums on the German bond market, employing no-arbitrage term-structure models with both observable and unobservable state variables, recently popularized by Ang and Piazzesi (2003). We conduct a specification analisys based on a new canonical representation for this class of models. We find that risk premiums display a considerable variability over time, are strongly counter-cyclical and bear no significant relation to inflation.

Keywords: term structure models; yield curve; risk premium (search for similar items in EconPapers)
JEL-codes: C5 G1 (search for similar items in EconPapers)
Date: 2006-02
New Economics Papers: this item is included in nep-fin and nep-fmk
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Citations: View citations in EconPapers (6)

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Related works:
Journal Article: Canonical Term-Structure Models with Observable Factors and the Dynamics of Bond Risk Premia (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:bdi:wptemi:td_580_06

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