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Working Paper
Forecasts of inflation and interest rates in no-arbitrage affine models
In this paper, we examine the forecasting ability of an affine term structure framework that jointly models the markets for Treasuries, inflation-protected securities, inflation derivatives, and oil future prices based on no-arbitrage restrictions across these markets. On the methodological side, we propose a novel way of incorporating information from these markets into an affine model. On the empirical side, two main findings emerge from our analysis. First, incorporating information from inflation options can often produce more accurate inflation forecasts than those based on the Survey of ...
Newsletter
Why Do Bond Prices and Interest Rates Move in Opposite Directions?
Bonds. Just bonds. This November 2023 issue of Page One Economics helps learners navigate the world of purchasing, holding, and selling bonds. In addition to the basics, students will learn that the bond market, where existing bonds are bought and sold, creates a situation where bond prices and interest rates move in opposite directions.