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A Non-Parametric Investigation of Risk Premia
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Chiara Peroni
Published/Copyright:
September 9, 2009
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.
Published Online: 2009-9-9
©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston
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Articles in the same Issue
- Article
- Changes in U.S. Inflation Persistence
- A Non-Parametric Investigation of Risk Premia
- Threshold Effects of Dismissal Protection Regulation and the Emergence of Temporary Work Agencies
- Test for Spatial Dominances in the Distribution of Stock Returns: Evidence from the Korean Stock Market Before and After the East Asian Financial Crisis
- Monetary Independence under Floating Exchange Rates: Evidence Based on International Breakeven Inflation Rates
