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A non-parametric investigation of risk premia

By Chiara Peroni

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.

Topics: G12 - Asset Pricing; Trading volume; Bond Interest Rates, C14 - Semiparametric and Nonparametric Methods: General
Year: 2007
DOI identifier: 10.2139/ssrn.1063522
OAI identifier: oai:mpra.ub.uni-muenchen.de:5126

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