Search Results
Working Paper
Term premiums and inflation uncertainty: empirical evidence from an international panel dataset
This paper provides cross-country empirical evidence on term premia, inflation uncertainty, and their relationship. It has three components. First, I construct a panel of zero-coupon nominal government bond yields spanning ten countries and eighteen years. From these, I construct forward rates and decompose these into expected future short-term interest rates and term premiums, using both statistical methods (an affine term structure model) and using surveys. Second, I construct alternative measures of time-varying inflation uncertainty for these countries, using actual inflation data and ...
Speech
Why are yield curves so flat and long rates so low globally? a speech at the Bankers' Association for Finance and Trade, New York, New York, June 15, 2006
Governor Randall S. Kroszner presented identical remarks at the Institute of International Bankers, New York, New York, June 15, 2006
Working Paper
Restrictions on Risk Prices in Dynamic Term Structure Models
Restrictions on the risk-pricing in dynamic term structure models (DTSMs) tighten the link between cross-sectional and time-series variation of interest rates, and make absence of arbitrage useful for inference about expectations. This paper presents a new econometric framework for estimation of affine Gaussian DTSMs under restrictions on risk prices, which addresses the issues of a large model space and of model uncertainty using a Bayesian approach. A simulation study demonstrates the good performance of the proposed method. Data for U.S. Treasury yields calls for tight restrictions on risk ...
Speech
Asset bubbles and the implications for central bank policy
Remarks at The Economic Club of New York, New York City.
Working Paper
Comments on Piazzesi and Schneider's \"Bond positions, expectations, and the yield curve\"
This working paper comments on Monika Piazzesi and Martin Schneider's "Bond Positions, Expectations, and the Yield Curve," delivered at the Fiscal Policy and Monetary/Fiscal Policy Interactions conference held at the Atlanta Fed on April 19?20, 2007.
Journal Article
Bond price premiums
Working Paper
The private premium in public bonds
This paper is the first to document the presence of a private premium in public bonds. We find that spreads are 31 basis points higher for public bonds of private companies than for bonds of public companies, even after controlling for observable differences, including rating, financial performance, industry, bond characteristics and issuance timing. The estimated private premium increases to 40 to 50 basis points when a propensity matching methodology is used or when we control for fixed issuer effects. Despite the premium pricing, bonds of private companies are no more likely to default or ...
Working Paper
What can EMU countries' sovereign bond spreads tell us about market perceptions of default probabilities during the recent financial crisis?
This paper presents a new approach to analysing recent movements of EMU sovereign bond spreads. Based on a GARCH-in-mean model originally used in the exchange rate target zone literature, spreads are decomposed into a risk premium, an expected loss component and a liquidity premium. Time-varying probabilities of default are derived. The results suggest that the rise in sovereign spreads during the recent financial crisis mainly reflects an increased expected loss component. In addition, the rescue of Bear Stearns in March 2008 seems to mark a change in market perceptions of sovereign bond ...
Speech
Why are yield curves so flat and long rates so low globally? a speech at the Institute of International Bankers, New York, New York, June 15, 2006
Governor Randall S. Kroszner presented identical remarks at the Bankers' Association for Finance and Trade, New York, New York, on June 15, 2006
Working Paper
Jump-diffusion processes and affine term structure models: additional closed-form approximate solutions, distributional assumptions for jumps, and parameter estimates
Affine term structure models in which the short rate follows a jump-diffusion process are difficult to solve, and the parameters of such models are hard to estimate. Without analytical answers to the partial difference differential equation (PDDE) for bond prices implied by jump-diffusion processes, one must find a numerical solution to the PDDE or exactly solve an approximate PDDE. Although the literature focuses on a single linearization technique to estimate the PDDE, this paper outlines alternative methods that seem to improve accuracy. Also, closed-form solutions, numerical estimates, ...