Skewness Risk and Bond Prices Documento de trabajo uri icon

Abstracto

  • Statistical evidence is reported that even outside disaster periods, agents face negative consumption skewness, as well as positive inflation skewness. Quantitative implications of skewness risk for nominal loan contracts in a pure exchange economy are derived. Key modeling assumptions are Epstein-Zin preferences for traders and asymmetric distributions for consumption and inflation innovations. The model is solved using a third-order perturbation and estimated by the simulated method of moments. Results show that skewness risk accounts for 6 to 7 percent of the risk premia depending on the bond maturity.

fecha de publicación

  • 2012

Palabras clave

  • Bond Premia
  • Nonlinear Dynamic Models
  • Simulated Method of Moments
  • Term Structure of Interest Rates

Número

  • 2012-14