TY  - BOOK
AU  - Vayanos,Dimitri
AU  - Vila,Jean-Luc
ED  - National Bureau of Economic Research.
TI  - A Preferred-Habitat Model of the Term Structure of Interest Rates
T2  - NBER working paper series
PY  - 2009///
CY  - Cambridge, Mass.
PB  - National Bureau of Economic Research
N1  - November 2009; Hardcopy version available to institutional subscribers
N2  - 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
UR  - https://www.nber.org/papers/w15487
UR  - http://dx.doi.org/10.3386/w15487
ER  -