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Real-Time Learning, Macroeconomic Uncertainty, and the Variance Risk Premium

Bianchi, Daniele - 2015

upward movements in realized market return volatility. Common wisdom connects these spikes with elevated uncertainty on … state variables and parameters. I show that infrequent, large and relatively transitory macroeconomic uncertainty shocks …, the onset of the second Gulf War, and the great financial crisis of 2008-2009. I compute macroeconomic uncertainty as the …

Persistent link: https://www.econbiz.de/10013034741

Ambiguity, Long-Run Risks, and Asset Prices

Wei, Bin - 2019

We generalize the long-run risks (LRR) model in Bansal and Yaron (2004) by incorporating the recursive smooth ambiguity aversion preferences of Klibanoff, Marinacci, and Mukerji (2005, 2009) and time-varying ambiguity. Relative to the Bansal-Yaron model, the generalized LRR model remains...

Persistent link: https://www.econbiz.de/10012896734

Macro Risks and the Term Structure of Interest Rates

Bekaert, Geert - 2019

We use non-Gaussian features in U.S. macroeconomic data to identify aggregate supply and demand shocks while imposing minimal economic assumptions. Macro risks represent the variables that govern the time-varying variance, skewness and higher-order moments of these two shocks, with "good"...

Persistent link: https://www.econbiz.de/10012899126

What Fed funds futures tell us about monetary policy uncertainty

Fontaine, Jean-Sébastien - 2016

The uncertainty around future changes to the Federal Reserve target rate varies over time. In our results, the main … driver of uncertainty is a "path" factor signaling information about future policy actions, which is filtered from federal … funds futures data. The uncertainty is highest when it signals a loosening cycle. The uncertainty raises the risk premium in …

Persistent link: https://www.econbiz.de/10011576374

Macro risks and the term structure of interest rates

Bekaert, Geert; Engstrom, Eric; Ermolov, Andrey - 2017

We use non-Gaussian features in U.S. macroeconomic data to identify aggregate supply and demand shocks while imposing minimal economic assumptions. Recessions in the 1970s and 1980s were driven primarily by supply shocks, later recessions were driven primarily by demand shocks, and the Great...

Persistent link: https://www.econbiz.de/10011709342

Ambiguity, long-run risks, and asset prices

Wei, Bin - 2021

I generalize the long-run risks (LRR) model of Bansal and Yaron (2004) by incorporating recursive smooth ambiguity aversion preferences from Klibanoff et al. (2005, 2009) and time-varying ambiguity. Relative to the Bansal-Yaron model, the generalized LRR model is as tractable but more flexible...

Persistent link: https://www.econbiz.de/10012617667

Macro Risks and the Term Structure of Interest Rates

Bekaert, Geert - 2018

We use non-Gaussian features in U.S. macroeconomic data to identify aggregate supply and demand shocks while imposing minimal economic assumptions. Recessions in the 1970s and 1980s were driven primarily by supply shocks; later recessions by demand shocks. We estimate macro risk factors that...

Persistent link: https://www.econbiz.de/10012935623

The Carry Trade and Implied Moment Risk

Broll, Michael - 2016

The carry trade is a zero net investment strategy that borrows in low yielding currencies and subsequently invests in high yielding currencies. It has been identified as highly profitable FX strategy delivering significantly excess returns with high Sharpe ratios. This paper shows that these...

Persistent link: https://www.econbiz.de/10012992882

XVA Hedging : Measuring its Performance and Risks via Discrete-Time Simulations

Sarais, Gabriele - 2015

In this article we explore different hedging options for an XVA book: this topic is of practical interest given that accounting principles make it compulsory for financial institutions to account for CVA and DVA in their balance sheet, generating income volatility. Further, capital requirements...

Persistent link: https://www.econbiz.de/10013029199

Intrinsic Prices of Risk

Le, Truc - 2014

We review the nature of some well-known phenomena such as volatility smiles, convexity adjustments and parallel derivative markets. We propose that the market is incomplete and postulate the existence of intrinsic risks in every contingent claim as a basis for understanding these phenomena. In a...

Persistent link: https://www.econbiz.de/10013057444