The Yield Curve and Financial Risk Premia

Geiger, Felix

doi:10.1007/978-3-642-21575-9

Cited by 9 publications

(6 citation statements)

References 231 publications

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“…The findings for the first and the second state variables are consistent with the consensus in the literature (see, e.g., Kuttner, 2001, Gürkaynak et al, 2005, Andersson et al, 2006, and Geiger, 2011) that only the "surprises" can impact the long end of the yield curve. Both state variables can significantly impact the long end in a condition of all else being equal.…”

Section: Contemporaneous Responsessupporting

confidence: 90%

Market Expectations of the Short Rate and the Term Structure of Interest Rates: A New Perspective from the Classic Model

2012

SSRN Journal

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Based on the classic Gaussian dynamic term structure model A 0 (3), I rotate the model to a special representation, the so called "Companion Form Realization", in which the state variables comprises the short rate and its related expectations.This unique feature makes the representation very useful in analyzing the response of the yield curve to the shocks in the short rate and its related expectations, and monitoring market expectations. Using the estimated model, I quantify a variety of yield responses to the changes in these important state variables; and also give an "unsurprising" pattern in which changes in state variables have little impact on the long end of the yield curve. Two case studies of recent unconventional monetary policies are also included.

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Section: Contemporaneous Responsessupporting

confidence: 90%

Market Expectations of the Short Rate and the Term Structure of Interest Rates: A New Perspective from the Classic Model

2012

SSRN Journal

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“…The latter becomes immensely important when one decides to add more than two interest rates as explanatory variables. A desirable way to achieve an improvement is to engage with finance literature (e.g.,Diebold & Rudebusch, ) and extensive macro‐finance models (e.g., Geiger, ), which would provide clues as to what functional form may work. Then, given the richer interest rate data set, one could use the exact functional form or a reasonable polynomial to do a restrictive estimation and thus forecasting.…”

Section: Discussion and Extensionmentioning

confidence: 99%

Using the yield curve to forecast economic growth

2020

Journal of Forecasting

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This paper finds the yield curve to have a well-performing ability to forecast the real gross domestic product growth in the USA, compared to professional forecasters and time series models. Past studies have different arguments concerning growth lags, structural breaks, and ultimately the ability of the yield curve to forecast economic growth. This paper finds such results to be dependent on the estimation and forecasting techniques employed. By allowing various interest rates to act as explanatory variables and various window sizes for the out-of-sample forecasts, significant forecasts from many window sizes can be found. These seemingly good forecasts may face issues, including persistent forecasting errors. However, by using statistical learning algorithms, such issues can be cured to some extent. The overall result suggests, by scientifically deciding the window sizes, interest rate data, and learning algorithms, many outperforming forecasts can be produced for all lags from one quarter to 3 years, although some may be worse than the others due to the irreducible noise of the data.

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“…Alternatively, one arrives at the same conclusion when using only a real stochastic discount factor with a price deflator (see, e.g. Geiger, ).…”

mentioning

confidence: 90%

Estimating Inflation Risk Premia Using Inflation‐linked Bonds: A Review

Kupfer

2018

Journal of Economic Surveys

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Abstract. This paper provides an overview of studies that estimate the inflation risk premium using inflation-linked bond (ILB) yields. I categorize existing studies, outline their research designs and compare their estimates for the inflation risk premium. Furthermore, the importance of accounting for ILB illiquidity and an overview of existing ILB liquidity proxies are demonstrated. A discussion of current literature developments, such as the zero lower bound, and an outline for future research directions conclude the paper.

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The Yield Curve and Financial Risk Premia

Cited by 9 publications

References 231 publications

Market Expectations of the Short Rate and the Term Structure of Interest Rates: A New Perspective from the Classic Model

Market Expectations of the Short Rate and the Term Structure of Interest Rates: A New Perspective from the Classic Model

Using the yield curve to forecast economic growth

Estimating Inflation Risk Premia Using Inflation‐linked Bonds: A Review

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