scholarly journals Estimação da Inflação Implícita de Curto Prazo

2018 ◽  
Vol 15 (2) ◽  
pp. 227
Author(s):  
Gustavo Silva Araujo ◽  
José Valentim Vicente
Keyword(s):  
Interest Rates ◽  
Risk Premium ◽  
Inflation Rate ◽  
Predictive Ability ◽  
Short Term ◽  
Government Bonds ◽  
Inflation Risk ◽  
Short Run ◽  
The Difference ◽  
Better Than

Implicit inflation or break-even inflation rate (BEIR) is the difference between nominal and real interest rates. In the Brazilian market, we can obtain it from indexed government bonds. However, when dealing with short-term BEIR, this task presents two difficulties: a) inflation-indexed bonds have indexation lags; b) inflation seasonality implies real interest rate seasonality. The aim of this paper is to propose a methodology to estimate the short-term BEIR that addresses these two issues. Assuming a negligible inflation risk premium in the short run, we evaluate the predictive ability of the BEIR by confronting it with expectations based on the market analysts’ forecasts published on the Focus Survey. The results show that the BEIR is competitive when compared to the Focus Survey. An advantage of the BEIR is that it allows monitoring of expectations better than surveys, since it is continuously updated.

Measuring inflation expectations in Russia using stock market data

2017 ◽  
pp. 111-122 ◽  
Author(s):  
M. Zhemkov ◽  
O. Kuznetsova
Keyword(s):  
Stock Market ◽  
Risk Premium ◽  
Liquidity Risk ◽  
Information Policy ◽  
Inflation Expectations ◽  
Government Bonds ◽  
Inflation Risk ◽  
Market Data ◽  
Inflation Risk Premium ◽  
The Difference

This paper is devoted to the measurement of inflation expectations in Russia based on stock market data for the period from July 2015 to December 2016. It calculates the difference between the yields of the nominal and inflation-indexed government bonds and adjusts it to the inflation risk premium and liquidity risk premium to obtain inflation expectations. This net indicator represents inflation expectations of the participants of the stock market. The estimated inflation expectations can be used to analyze the effectiveness of the information policy.

scholarly journals The Pure Expectations Theory and Quarterly Interest Rate Premiums

2017 ◽  
Vol 7 (1) ◽  
pp. 161
Author(s):  
Samih Antoine Azar
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Risk Premium ◽  
Sampling Error ◽  
Small Sample ◽  
Short Term ◽  
Risk Premiums ◽  
Sample Bias ◽  
Conditional Tests ◽  
The Difference

The expectations theory posits that the long interest rate is an average of expected short term interest rates with the possibility of the existence of a risk premium. This paper looks upon fourteen samples of investments for which the difference in maturity is three months. All yields are actual yields and are adjusted to have the same maturities as the short rate. The evidence is strong for the pure expectations theory which predicts that the risk premiums are zero. This should not be surprising because the premium that we are looking for is merely 4 basis points per quarter. The contribution of this paper, besides giving support to the pure expectations theory, is to lay out the fundamental and basic methodology that one should follow in order to study other investments similar to ours. Both unconditional and conditional tests are performed. Because of sampling error and small-sample bias the unconditional tests may be preferable. 

scholarly journals Ambiguity, Nominal Bond Yields, and Real Bond Yields

2020 ◽  
Vol 2 (2) ◽  
pp. 177-192 ◽  
Author(s):  
Guihai Zhao
Keyword(s):  
Risk Premium ◽  
Bond Yields ◽  
Case Scenario ◽  
Worst Case ◽  
Inflation Risk ◽  
Expectations Hypothesis ◽  
Long Run ◽  
Short Run ◽  
The Difference

This paper presents an equilibrium bond-pricing model that jointly explains the upward-sloping nominal and real yield curves and the violation of the expectations hypothesis. Instead of relying on the inflation risk premium, the ambiguity-averse agent faces different amounts of Knightian uncertainty in the long run versus the short run; hence, the model-implied nominal and real short rate expectations are upward sloping under the agent’s worst-case equilibrium beliefs. The expectations hypothesis roughly holds under investors’ worst-case beliefs. The difference between the worst-case scenario and the true distribution makes realized excess returns on long-term bonds predictable. (JEL D81, D84, E23, E31, E43, E44, G12)

Determinants of Treasury-LIBOR Swap Spreads

2005 ◽  
Vol 08 (04) ◽  
pp. 687-705 ◽  
Author(s):  
D. K. Malhotra ◽  
Vivek Bhargava ◽  
Mukesh Chaudhry
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Default Risk ◽  
Yield Curve ◽  
Short Term ◽  
Long Run ◽  
Interest Rate Volatility ◽  
Short Run ◽  
Using Data ◽  
Swap Spreads

Using data from the Treasury versus London Interbank Offer Swap Rates (LIBOR) for October 1987 to June 1998, this paper examines the determinants of swap spreads in the Treasury-LIBOR interest rate swap market. This study hypothesizes Treasury-LIBOR swap spreads as a function of the Treasury rate of comparable maturity, the slope of the yield curve, the volatility of short-term interest rates, a proxy for default risk, and liquidity in the swap market. The study finds that, in the long-run, swap spreads are negatively related to the yield curve slope and liquidity in the swap market. We also find that swap spreads are positively related to the short-term interest rate volatility. In the short-run, swap market's response to higher default risk seems to be higher spread between the bid and offer rates.

scholarly journals A New Approach to Gauging Inflation Expectations

2009 ◽  
pp. 1-4
Author(s):  
Joseph G. Haubrich
Keyword(s):  
Interest Rates ◽  
Risk Premium ◽  
New Method ◽  
Inflation Expectations ◽  
Real Interest Rates ◽  
Inflation Risk ◽  
New Approach ◽  
Expected Inflation ◽  
Inflation Risk Premium

This Economic Commentary explains a relatively new method of uncovering inflation expectations, real interest rates, and an inflation-risk premium. It provides estimates of expected inflation from one month to 30 years, an estimate of the inflation-risk premium, and a measure of real interest rates, particularly a short (one-month) rate, which is not readily available from the TIPS market. Calculations using the method suggest that longer-term inflation expectations remain near historic lows. Furthermore, the inflation-risk premium is also low, which in the model means that inflation is not expected to deviate far from expectations.

scholarly journals Quantitative Monetary Easing and Risk in Financial Asset Markets

2006 ◽  
Vol 6 (1) ◽  
pp. 1-54 ◽  
Author(s):  
Takeshi Kimura ◽  
David H. Small
Keyword(s):  
Interest Rates ◽  
Large Scale ◽  
Corporate Bonds ◽  
Asset Markets ◽  
Low Grade ◽  
Short Term ◽  
Government Bonds ◽  
Risk Premiums ◽  
Portfolio Rebalancing

In this paper, we empirically examine the portfolio-rebalancing effects stemming from the policy of “quantitative monetary easing” recently undertaken by the Bank of Japan when the nominal short-term interest rate was virtually at zero. Portfolio-rebalancing effects resulting from the open market purchase of long-term government bonds under this policy have been statistically significant. Our results also show that the portfolio-rebalancing effects were beneficial in that they reduced risk premiums on assets with counter-cyclical returns, such as government and high-grade corporate bonds. But, they may have generated the adverse effects of increasing risk premiums on assets with pro-cyclical returns, such as equities and low-grade corporate bonds. These results are consistent with a CAPM framework in which business-cycle risk importantly affects risk premiums. Our estimates capture only some of the effects of quantitative easing and thus do not imply that the complete set of effects were adverse on net for Japan’s economy. However, our analysis counsels caution in accepting the view that, ceteris paribus, a massive large-scale purchase of long-term government bonds by a central bank provides unambiguously positive net benefits to financial markets at zero short-term interest rates.

The Risk Premium on Ordinary Shares

1995 ◽  
Vol 1 (2) ◽  
pp. 251-330 ◽  
Author(s):  
A.D. Wilkie
Keyword(s):  
Risk Premium ◽  
Geometric Mean ◽  
Arithmetic Mean ◽  
Short Term ◽  
Arithmetic Means ◽  
Price Inflation ◽  
Geometric Means ◽  
True Model ◽  
The Difference

ABSTRACTThe risk premium on ordinary shares is investigated, by studying the total returns on ordinary shares, and on both long-term and short-term fixed-interest investments over the period 1919 to 1994, and by analysing the various components of that return. The total returns on ordinary shares exceeded those on fixed-interest investments by over 5% p.a. on a geometric mean basis and by over 7% p.a. on an arithmetic mean basis, but it is argued that these figures are misleading, because most of the difference can be accounted for by the fact that price inflation turned out to be about 4.5% p.a. over the period, whereas investors had been expecting zero inflation.Quotations from contemporary authors are brought forward to demonstrate what contemporary attitudes were. Simulations are used along with the Wilkie stochastic asset model to show what the results would be if investors make various assumptions about the future, but the true model turns out to be different from what they expected. The differences between geometric means of the data and arithmetic means are shown to correspond to differences between using medians or means of the distribution of future returns, and it is suggested that, for discounting purposes, medians are the better measure.

scholarly journals Measurements of UV irradiance within the area of one satellite pixel

2008 ◽  
Vol 8 (18) ◽  
pp. 5615-5626 ◽  
Author(s):  
P. Weihs ◽  
M. Blumthaler ◽  
H. E. Rieder ◽  
A. Kreuter ◽  
S. Simic ◽  
...  
Keyword(s):  
Ozone Monitoring Instrument ◽  
Short Term ◽  
Uv Index ◽  
Clear Sky ◽  
Uv Irradiance ◽  
Instantaneous Values ◽  
The Mean ◽  
The Difference ◽  
Sky Conditions ◽  
Better Than

Abstract. A measurement campaign was performed in the region of Vienna and its surroundings from May to July 2007. Within the scope of this campaign erythemal UV was measured at six ground stations within a radius of 30 km. First, the homogeneity of the UV levels within the area of one satellite pixel was studied. Second, the ground UV was compared to ground UV retrieved by the ozone monitoring instrument (OMI) onboard the NASA EOS Aura Spacecraft. During clear-sky conditions the mean bias between erythemal UV measured by the different stations was within the measurement uncertainty of ±5%. Short term fluctuations of UV between the stations were below 3% within a radius of 20 km. For partly cloudy conditions and overcast conditions the discrepancy of instantaneous values between the stations is up to 200% or even higher. If averages of the UV index over longer time periods are compared the difference between the stations decreases strongly. The agreement is better than 20% within a distance of 10 km between the stations for 3 h averages. The comparison with OMI UV showed for clear-sky conditions higher satellite retrieved UV values by, on the average, approximately 15%. The ratio of OMI to ground measured UV lies between 0.9 and 1.5. and strongly depends on the aerosol optical depth. For partly cloudy and overcast conditions the OMI derived surface UV estimates show larger deviation from the ground-based reference data, and even bigger systematic positive bias. Here the ratio OMI to ground data lies between 0.5 and 4.5. The average difference between OMI and ground measurements is +24 to +37% for partly cloudy conditions and more than +50% for overcast conditions.

Default Risk and the Effects of Fiscal Policy on Interest Rates: 1929–1945

1988 ◽  
Vol 16 (3) ◽  
pp. 357-373
Author(s):  
David Bowles ◽  
Holley Ulbrich ◽  
Myles Wallace
Keyword(s):  
Fiscal Policy ◽  
Interest Rates ◽  
Empirical Evidence ◽  
Risk Premium ◽  
Default Risk ◽  
Corporate Bonds ◽  
Private Investment ◽  
Crowding Out ◽  
Government Bonds ◽  
Macroeconomic Models

Conventional macroeconomic models suggest that expansionary fiscal policy causes higher interest rates, resulting in crowding out of private investment. In this article, we argue that such models ignore the default risk differential between the interest rates on government bonds and corporate bonds. If expansionary fiscal policy causes an expansion in real GNP, default risk falls on corporate bonds. Our model suggests that if the default risk premium falls, (1) corporate interest rates may fall relative to rates on government bonds and (2) private investment is crowded in. We find some supporting empirical evidence of this effect for the period 1929–1945.

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