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Bond Risk Premia in Consumption-Based Models
| Content Provider | Scilit |
|---|---|
| Author | Creal, Drew D. Wu, Jing Cynthia |
| Copyright Year | 2017 |
| Description | Journal: SSRN Electronic Journal Workhorse Gaussian affine term structure models (ATSMs) attribute time-varying bond risk premia to changing prices of risk, while structural models with recursive preferences credit it to stochastic volatility. We reconcile these competing channels by introducing a novel form of external habit into an otherwise standard model with recursive preferences. The new model has an ATSM representation with analytical bond prices making it empirically tractable. We use particle Markov chain Monte Carlo to estimate the model, and find that time variation in bond term premia is predominantly driven by the price of risk. |
| Related Links | http://www.nber.org/papers/w22183.pdf https://papers.ssrn.com/sol3/Delivery.cfm?abstractid=2763622 |
| ISSN | 10914358 |
| e-ISSN | 15565068 |
| DOI | 10.2139/ssrn.2763622 |
| Journal | SSRN Electronic Journal |
| Language | English |
| Publisher | Elsevier BV |
| Publisher Date | 2017-05-22 |
| Access Restriction | Open |
| Subject Keyword | Journal: SSRN Electronic Journal Bond Risk Recursive Preferences |
| Content Type | Text |
| Resource Type | Article |
| Subject | Public Health, Environmental and Occupational Health Psychiatry and Mental Health |