Pierre colindufresne, greg duffee, ilan kremer, martin lettau, rajnish mehra and an anonymous referee for helpful comments and suggestions. A primer on program trading and stock price volatility, research in financial services public and private policy 4, 1992, pp. An earlier version received the nasdaq omx award for best paper on asset pricing at the 2015 wfa meeting. Summary interpretation term structure of risk in expected returns discussion by greg duffee, johns hopkins 2018 carey finance conference, 612018. Search the worlds most comprehensive index of fulltext books. It outlines forecasting methodologies implied by this literature, including dynamic, noarbitrage term structure models and their macrofinance extensions. The time horizon of price responses to quantitative easing. Asset pricing theory all stems from one simple concept, derived in the. The uncertainty about persistence is consistent with assetpricing research. The asset pricing results are based on the three increasingly restrictive assumptions. The main conclusion is that none of our models is consistent with basic properties of nominal yields.
Class participation 25% problem sets will be distributed. The focus is on the quantity of inflation risk, not the pricing. There are two polar approaches to this elaboration. We would like to thank greg duffee, darrell duffie, arturo estrella, eric ghysels, paul glasserman, scott joslin, don kim, monika piazzesi, joshua rosenberg, ken singleton, jonathan wright, hao wu, and seminar. This is a thoroughly updated edition of dynamic asset pricing theory, the standard text for doctoral students and researchers on the theory of asset pricing and portfolio selection in multiperiod settings under uncertainty. We also benefited from the input of conference participants at the 2010 annual meeting of the european finance association, 2011 texas finance festival, 2011 annual meeting of the western finance association, 2011 centre for economic policy research gerzensee summer symposium on financial markets, 2011 nber asset pricing fall meeting, and 2012. The rest is elaboration, special cases, and a closet full of tricks that make the central equation useful for one or another application. Jonathan wright economics johns hopkins university. Handbook of the economics of finance vol 2, part b, pages 799. Banks exposure to largescale asset purchases, as measured by the relative prevalence of mortgagebacked securities on their books, affects lending following unconventional monetary policy shocks. I began my professional career as a staff economist at the federal reserve board.
This chapter discusses what the assetpricing literature concludes about the forecastability of interest rates. Expected inflation and other determinants of treasury yields. Alan kraus gratefully acknowledges support from sshrc. Greg duffee 2 course requirements the course grades will be based on. Handbook of the economics of finance, vol 2, part b econpapers. Greg duffee economics johns hopkins university jhu economics. My research focuses primarily on building and testing mathematical models of interest rate behavior. Asset pricing search for similar items in econpapers jelcodes. Two asset barrier option under stochastic volatility article in applied mathematical finance 246.
Term premia and interest rate forecasts in affine models gregory r. It is difficult to explain the average shape of the nominal yield curve, the variation of yields over time, and the predictability of excess bond returns. This chapter discusses what the asset pricing literature concludes about the forecastability of interest rates. If all goes well, they will also allow the students to explore some issues in finance that are not discussed in depth in the papers we will read. The second question is studied in the context of two theories of returns.
Shocks to nominal bond yields are comprised of news about expected future inflation, news about expected future real short rates, and news about expected excess returns. Forecasting interest rates research papers in economics. The third part of the course studies the empirical evidence for and against the equilibrium theories of asset returns, with an. Expected inflation and other determinants of treasury. Two assetbarrier option under stochastic volatility. Dynamic asset pricing theory princeton university press.
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