A non-parametric investigation of risk premia
AbstractThis paper studies determinants of risk premia using a non-parametric term-structure model of the corporate spread. The model, which measures the extra return of defaultable corporate bonds on their government counterparts, involves the rate of inflation, a key macroeconomic variable that is found to explain the spread non-linearly. This study shows that non-linear methods are useful to investigate features of credit risk and that they give better results than their linear counterparts, enabling testing of affine term-structure specifications. The paper also shows how the non-linear model can be used to forecast the future course of the spread.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 15010.
Date of creation: 11 Feb 2008
Date of revision: 15 Apr 2009
risk premium; corporate spread; default; additive models; non-parametric estimation.;
Other versions of this item:
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
- C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-05-09 (All new papers)
- NEP-FOR-2009-05-09 (Forecasting)
- NEP-ORE-2009-05-09 (Operations Research)
- NEP-RMG-2009-05-09 (Risk Management)
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