Term structure of interest rates: modelling the risk premium using a two-horizons framework

Autor: Remzi Uctum, Georges Prat
Přispěvatelé: EconomiX, Université Paris Nanterre (UPN)-Centre National de la Recherche Scientifique (CNRS), Parisnanterre, EconomiX
Jazyk: angličtina
Rok vydání: 2018
Předmět:
Organizational Behavior and Human Resource Management
Economics and Econometrics
JEL: C - Mathematical and Quantitative Methods/C.C5 - Econometric Modeling/C.C5.C51 - Model Construction and Estimation
term structure
media_common.quotation_subject
Risk premium
[QFIN.RM]Quantitative Finance [q-fin]/Risk Management [q-fin.RM]
Debt
0502 economics and business
Econometrics
Economics
JEL: G - Financial Economics/G.G1 - General Financial Markets/G.G1.G11 - Portfolio Choice • Investment Decisions
050207 economics
[SHS.ECO] Humanities and Social Sciences/Economics and Finance
media_common
050208 finance
Horizon (archaeology)
05 social sciences
interest rates
[SHS.ECO]Humanities and Social Sciences/Economics and Finance
Maturity (finance)
JEL: D - Microeconomics/D.D8 - Information
Knowledge
and Uncertainty/D.D8.D84 - Expectations • Speculations
Interest rate
JEL: G - Financial Economics/G.G1 - General Financial Markets/G.G1.G14 - Information and Market Efficiency • Event Studies • Insider Trading
risk premium
[No keyword available]
Portfolio
JEL: E - Macroeconomics and Monetary Economics/E.E4 - Money and Interest Rates/E.E4.E43 - Interest Rates: Determination
Term Structure
and Effects
Yield curve
Affine term structure model
Zdroj: 5th International Symposium on Computational Economics and Finance (ISCEF)
5th International Symposium on Computational Economics and Finance (ISCEF), 2018, Paris, France
35th International Symposium on Money, Banking and Finance (GDRE)
35th International Symposium on Money, Banking and Finance (GDRE), 2018, Aix-en-Provence, France
Journal of Economic Behavior and Organization
Journal of Economic Behavior and Organization, Elsevier, 2021, 182, pp.421-436. ⟨10.1016/j.jebo.2019.09.006⟩
Journal of Economic Behavior and Organization, Elsevier, 2021, 182, pp.421-441
Journal of Economic Behavior and Organization, 2021, 182, pp.421-436. ⟨10.1016/j.jebo.2019.09.006⟩
ISSN: 0167-2681
Popis: International audience; We propose a two-horizon interest rate term structure model where the maturity of the riskless rate is the one of the debt security whose duration equals investor's desired horizon. Our framework thus relaxes the usual assumptions of the literature that the riskless rate is unchangingly the short period rate. A representative investor compares at each of the 3and the 6-month horizons the risk premium offered by the market and the one they require to take a risky position, the latter premium being determined by the portfolio choice theory. Due to market frictions, the deviation between the offered and required risk premium evolves according to a mean-reverting process. Using 3-month ahead survey-based expectations of the US 3-month Treasury Bill rate, we employ Kalman filtering to estimate the market risk premium where the preference parameter of investors for alternative horizons is time-varying. We find that the market comprises both a group of agents with 3-month preferred horizon and a group of agents with 6-month preferred horizon with a weigh of two-thirds for the first group.
Databáze: OpenAIRE
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