A Preferred-Habitat Model of the Term Structure of Interest Rates /
Vayanos, Dimitri.
A Preferred-Habitat Model of the Term Structure of Interest Rates / Dimitri Vayanos, Jean-Luc Vila. - Cambridge, Mass. National Bureau of Economic Research 2009. - 1 online resource: illustrations (black and white); - NBER working paper series no. w15487 . - Working Paper Series (National Bureau of Economic Research) no. w15487. .
November 2009.
We model the term structure of interest rates as resulting from the interaction between investor clienteles with preferences for specific maturities and risk-averse arbitrageurs. Because arbitrageurs are risk averse, shocks to clienteles' demand for bonds affect the term structure---and constitute an additional determinant of bond prices to current and expected future short rates. At the same time, because arbitrageurs render the term structure arbitrage-free, demand effects satisfy no-arbitrage restrictions and can be quite different from the underlying shocks. We show that the preferred-habitat view of the term structure generates a rich set of implications for bond risk premia, the effects of demand shocks and of shocks to short-rate expectations, the economic role of carry trades, and the transmission of monetary policy.
System requirements: Adobe [Acrobat] Reader required for PDF files.
Mode of access: World Wide Web.
A Preferred-Habitat Model of the Term Structure of Interest Rates / Dimitri Vayanos, Jean-Luc Vila. - Cambridge, Mass. National Bureau of Economic Research 2009. - 1 online resource: illustrations (black and white); - NBER working paper series no. w15487 . - Working Paper Series (National Bureau of Economic Research) no. w15487. .
November 2009.
We model the term structure of interest rates as resulting from the interaction between investor clienteles with preferences for specific maturities and risk-averse arbitrageurs. Because arbitrageurs are risk averse, shocks to clienteles' demand for bonds affect the term structure---and constitute an additional determinant of bond prices to current and expected future short rates. At the same time, because arbitrageurs render the term structure arbitrage-free, demand effects satisfy no-arbitrage restrictions and can be quite different from the underlying shocks. We show that the preferred-habitat view of the term structure generates a rich set of implications for bond risk premia, the effects of demand shocks and of shocks to short-rate expectations, the economic role of carry trades, and the transmission of monetary policy.
System requirements: Adobe [Acrobat] Reader required for PDF files.
Mode of access: World Wide Web.