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The Banking View of Bond Risk Premia / Valentin Haddad, David A. Sraer.
- Format:
- Book
- Author/Creator:
- Haddad, Valentin.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w26369.
- NBER working paper series no. w26369
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2019.
- Summary:
- Banks' balance-sheet exposure to fluctuations in interest rates strongly forecasts excess Treasury bond returns. This result is consistent with optimal risk management, a banking counterpart to the household Euler equation. In equilibrium, the bond risk premium compensates banks for bearing fluctuations in interest rates. When banks' exposure to interest rate risk increases, the price of this risk simultaneously rises. We present a collection of empirical observations supporting this view, but also discuss several challenges to this interpretation.
- Notes:
- Print version record
- October 2019.
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