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A Non-Parametric Investigation of Risk Premia

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  • Peroni Chiara

    (University of East Anglia)

Abstract

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.

Suggested Citation

  • Peroni Chiara, 2009. "A Non-Parametric Investigation of Risk Premia," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 13(4), pages 1-52, September.
    • Handle: RePEc:bpj:sndecm:v:13:y:2009:i:4:n:2
    DOI: 10.2202/1558-3708.1617
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    References listed on IDEAS

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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

    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
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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