Bond Pricing with a Time-Varying Price of Risk in an Estimated Medium-Scale Bayesian DSGE Model

2014 ◽  
Vol 46 (5) ◽  
pp. 837-888 ◽  
Author(s):  
IAN DEW-BECKER
Keyword(s):  
Bond Pricing ◽  
Time Varying ◽  
Dsge Model ◽  
Medium Scale ◽  
Price Of Risk

scholarly journals Lie-Algebraic Approach for Pricing Zero-Coupon Bonds in Single-Factor Interest Rate Models

2013 ◽  
Vol 2013 ◽  
pp. 1-9 ◽  
Author(s):  
C. F. Lo
Keyword(s):  
Interest Rate ◽  
Algebraic Approach ◽  
Dynamical Symmetry ◽  
Bond Pricing ◽  
Model Parameters ◽  
Time Varying ◽  
Single Factor ◽  
Bond Price ◽  
Interest Rate Models ◽  
Root Model

The Lie-algebraic approach has been applied to solve the bond pricing problem in single-factor interest rate models. Four of the popular single-factor models, namely, the Vasicek model, Cox-Ingersoll-Ross model, double square-root model, and Ahn-Gao model, are investigated. By exploiting the dynamical symmetry of their bond pricing equations, analytical closed-form pricing formulae can be derived in a straightfoward manner. Time-varying model parameters could also be incorporated into the derivation of the bond price formulae, and this has the added advantage of allowing yield curves to be fitted. Furthermore, the Lie-algebraic approach can be easily extended to formulate new analytically tractable single-factor interest rate models.

Term Premium Dynamics and the Taylor Rule

2017 ◽  
Vol 07 (04) ◽  
pp. 1750011 ◽  
Author(s):  
Michael Gallmeyer ◽  
Burton Hollifield ◽  
Francisco Palomino ◽  
Stanley Zin
Keyword(s):  
Monetary Policy ◽  
Term Structure ◽  
Taylor Rule ◽  
Exchange Economy ◽  
Bond Pricing ◽  
Time Varying ◽  
Inflation Dynamics ◽  
Term Premium ◽  
Nominal Term

We explore the bond-pricing implications of an exchange economy where preference shocks result in time-varying term premiums in real yields with a Taylor rule determining inflation dynamics and nominal term premiums. We calibrate the model by matching the term structure of the means and volatilities of nominal yields. Unlike a model with exogenous inflation, a Taylor rule matching empirical properties of inflation leads to nominal term premiums that are volatile at long maturities. Increasing monetary policy aggressiveness decreases the level and volatility of nominal yields.

Learning in a Medium-Scale DSGE Model with Expectations Based on Small Forecasting Models

2012 ◽  
Vol 4 (2) ◽  
pp. 65-101 ◽  
Author(s):  
Sergey Slobodyan ◽  
Raf Wouters
Keyword(s):  
Adaptive Learning ◽  
Rational Expectations ◽  
Phillips Curve ◽  
Inflation Expectations ◽  
Dsge Model ◽  
Wage Dynamics ◽  
Medium Scale ◽  
Exogenous Shocks ◽  
Forecasting Models ◽  
Empirical Performance

This paper evaluates the empirical performance of a medium-scale DSGE model with agents forming expectations using small forecasting models updated by the Kalman filter. The adaptive learning model fits the data better than the rational expectations (RE) model. Beliefs about the inflation persistence explain the observed decline in the mean and the volatility of inflation as well as Phillips curve flattening. Learning about inflation results in lower estimates for the persistence of the exogenous shocks that drive price and wage dynamics in the RE version of the model. Expectations based on small forecasting models are closely related to the survey evidence on inflation expectations. (JEL C53, D83, D84, E13, E17, E31)

scholarly journals A time varying DSGE model with financial frictions

2016 ◽  
Vol 38 ◽  
pp. 690-716 ◽  
Author(s):  
Ana Beatriz Galvão ◽  
Liudas Giraitis ◽  
George Kapetanios ◽  
Katerina Petrova
Keyword(s):  
Financial Frictions ◽  
Time Varying ◽  
Dsge Model
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