scholarly journals Does Time Varying Risk Premia Exist in the International Bond Market? An Empirical Evidence from Australian and French Bond Market

2021 ◽  
Vol 9 (1) ◽  
pp. 3
Author(s):  
Hira Aftab ◽  
A. B. M. Rabiul Alam Beg
Keyword(s):  
Risk Premium ◽  
Rational Expectation ◽  
Policy Decision ◽  
Risk Premia ◽  
Bond Market ◽  
Bond Markets ◽  
Time Varying ◽  
Volatility Spillovers ◽  
Strategic Policy ◽  
Expectation Theory

The presence of risk premium is an issue that weakens the rational expectation hypothesis. This paper investigates changing behavior of time varying risk premium for holding 10 year maturity bond using a bivariate VARMA-DBEKK-AGARCH-M model. The model allows for asymmetric risk premia, causality and co-volatility spillovers jointly in the global bond markets. Empirical results show significant asymmetric partial co-volatility spillovers and risk premium exist in the bond markets. The estimates of the bivariate risk premia show bi-directional causality exist between the Australia and France Bond markets. Overall results suggest nonexistence of pure rational expectation theory in the risk premium model. This information is useful for the agents’ strategic policy decision making in global bond markets.

FORECASTING FORWARD EXCHANGE RATE RISK PREMIUM IN SINGAPORE DOLLAR/US DOLLAR EXCHANGE RATE MARKET

2009 ◽  
Vol 54 (02) ◽  
pp. 283-298 ◽  
Author(s):  
KHURSHID M. KIANI
Keyword(s):  
Exchange Rates ◽  
Risk Premium ◽  
Risk Premia ◽  
Foreign Exchange Rates ◽  
Time Varying ◽  
Volatility Clustering ◽  
Significant Evidence ◽  
Gaussian Signal ◽  
Us Dollar ◽  
Noise Models

In this research, monthly forward exchange rates are evaluated for possible existence of time varying risk premia in Singapore forward foreign exchange rates against US dollar. The time varying risk premia in Singapore dollar is modeled using non-Gaussian signal plus noise models that encompass non-normality and time varying volatility. The results from signal plus noise models show statistically significant evidence of time varying risk premium in Singapore forward exchange rates although we failed to reject the hypotheses of no risk premium in the series. The results from Gaussian versions of these models are not much different and are in line with Wolff (1987) who also used the same methodology in Gaussian settings. Our results show statistically significant evidence of volatility clustering in Singapore forward exchange rates. The results from Gaussian signal plus noise models also show statistically significant evidence of volatility clustering and non-normality in Singapore forward foreign exchange rates. Additional tests on the series show that exclusion of conditional heteroskedasticity from the signal plus noise models leads to false statistical inferences.

scholarly journals The Foreign Exchange Risk Premium A Disaggregate Approach

2011 ◽  
Vol 18 (1) ◽  
Author(s):  
Dionysios Chionis ◽  
Nicolaos Kyriazis
Keyword(s):  
Foreign Exchange ◽  
Risk Premium ◽  
Foreign Exchange Market ◽  
Risk Premia ◽  
Time Varying ◽  
Foreign Exchange Risk ◽  
Market Participants ◽  
Exchange Risk ◽  
Foreign Exchange Risk Premium ◽  
Japanese Yen

<p class="MsoBodyText" style="margin: 0in 0.5in 0pt;"><span style="mso-bidi-font-style: italic;"><span style="font-size: x-small;"><span style="font-family: Times New Roman;">This paper re-examines the issue of the existence of a time-varying risk premia in the three foreign exchange markets. By using the theoretical framework developed by Domowitz and Hakkio it relates the risk premium in the foreign exchange market with the heterogeneity across the market participants. The empirical research using a disaggregate survey data base support the importance is supportive of the existence of time-varying risk premia for the British Pound, German Mark and Japanese Yen exchange rates. In particular, we demonstrate that consensus measures of the risk premium mask the existence because of the importance of heterogenous expectations.</span></span></span></p>

Sources of Time Varying Risk and Risk Premia in U.S. Stock and Bond Markets

2003 ◽  
Author(s):  
Bala Arshanapalli ◽  
Lorne N. Switzer ◽  
Alexandre Vezina
Keyword(s):  
Risk Premia ◽  
Bond Markets ◽  
Time Varying

Risk Premia in Covered Bond Markets

2012 ◽  
Author(s):  
Marcel Prokopczuk ◽  
Volker Vonhoff
Keyword(s):  
Risk Premia ◽  
Bond Markets

Investments and Risk Transfers

2017 ◽  
Vol 92 (6) ◽  
pp. 1-23 ◽  
Author(s):  
Tim Baldenius ◽  
Beatrice Michaeli
Keyword(s):  
Moral Hazard ◽  
Risk Premium ◽  
Bargaining Power ◽  
Risk Premia ◽  
The Other ◽  
Investment Risk ◽  
Incomplete Contracting ◽  
Risk Transfer ◽  
Specific Investments ◽  
Division Managers

ABSTRACT We demonstrate a novel link between relationship-specific investments and risk in a setting where division managers operate under moral hazard and collaborate on joint projects. Specific investments increase efficiency at the margin. This expands the scale of operations and thereby adds to the compensation risk borne by the managers. Accounting for this investment/risk link overturns key findings from prior incomplete contracting studies. We find that if the investing manager has full bargaining power vis-à-vis the other manager, he will underinvest relative to the benchmark of contractible investments; with equal bargaining power, however, he may overinvest. The reason is that the investing manager internalizes only his own share of the investment-induced risk premium (we label this a “risk transfer”), whereas the principal internalizes both managers' incremental risk premia. We show that high pay-performance sensitivity (PPS) reduces the managers' incentives to invest in relationship-specific assets. The optimal PPS, thus, trades off investment and effort incentives.

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