A Non-Parametric Investigation of Risk Premia
This 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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Volume (Year): 13 (2009)
Issue (Month): 4 (September)
Pages: 1-52
| Handle: | RePEc:bpj:sndecm:v:13:y:2009:i:4:n:2 |
| Contact details of provider: | Web page: http://www.degruyter.com
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| Order Information: | Web: http://www.degruyter.com/view/j/snde |
References listed on IDEAS
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