Title: Bond Risk Premia: The Information in Really Long-Maturity Forward Rates
Abstract: Long-term interest rates are largely ignored in the empirical literature on the term structure and yet contain information that hugely improves the precision of estimates of both risk premia and expectations of future rates. At long maturities the slope of the term structure of risk premia becomes "almost observable" and this provides a strong constraint on the whole term structure of estimated risk premia. Accounting for time variation in yield volatility is key to successful exploitation of the information in long rates. This excludes Gaussian models which perform very poorly in the presence of time-varying volatility.
Publication Year: 2021
Publication Date: 2021-01-01
Language: en
Type: article
Indexed In: ['crossref']
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Cited By Count: 2
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