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A non-parametric investigation of risk premia

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  • Peroni, Chiara

Abstract

This paper investigates features of credit risk using non-parametric techniques, studying 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 approach demonstrates the usefulness of non-linear approaches in contrast with standard linear approaches. The model is also useful to forecast the future course of the spread.

Suggested Citation

  • Peroni, Chiara, 2007. "A non-parametric investigation of risk premia," MPRA Paper 5126, University Library of Munich, Germany, revised 01 Dec 2007.
    • Handle: RePEc:pra:mprapa:5126
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    References listed on IDEAS

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    1. Duffie, Darrell & Saita, Leandro & Wang, Ke, 2007. "Multi-period corporate default prediction with stochastic covariates," Journal of Financial Economics, Elsevier, vol. 83(3), pages 635-665, March.
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    Cited by:

    1. Angelos Kanas & Angelos Kotios & Panagiotis D. Zervopoulos, 2019. "Semi-parametric real exchange rates dynamics," Review of Quantitative Finance and Accounting, Springer, vol. 52(2), pages 643-656, February.

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    More about this item

    Keywords

    Risk premium; affine models; non-parametric regression;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General

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