A Risk-Premium Adjustment to the Policy Rate Path

Abstract: We offer a method to derive a risk-premium adjustment to the risk-neutral policy rate path implied by raw financial quotes. Our method aims to preserve the information derived from high-frequency data, while also filtering out noise unrelated to future macro-finance conditions.

Keywords: Risk; Risk management;

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Bibliographic Information

Provider: Federal Reserve Bank of Chicago

Part of Series: Chicago Fed Letter

Issue: 432