Press review
MondoVisione
"Riccardo Rebonato, Professor of Finance, EDHEC-Risk Institute, EDHEC Business School is specialist in interest rate risk modelling with applications to bond portfolio management and fixed-income derivatives pricing. He gives you his insights on the inverted yield curve and unveil the latest estimates of the EDHEC Bond Risk Premium Monitor with a comparison of the 10-year term premium estimated by the Cochrane-Piazzesi, the Cieslak-Povala, the Slope &Cycle, and the EDHEC Stochastics Market price of Risk models. The inversion of the US Treasury yield curve is creating headaches in many quarters, not least in the estimate of risk premia. All the best-trusted models (including the slope, the Cochrane-Piazzesi, the Cieslak-Povala – some of these used, or at least quoted, by the Fed) are giving nonsensical answers, estimating risk premia as negative as -5% or more for the 10-year yield. See these model estimates in Fig 1. What is happening? If taken literally, these models would imply future rates at such negative levels to make the German Bunds look like high-yielders."
Copyright MondoVisione
http://www.mondovisione.com/media-and-resources/news/edhec-risk-institute-the-m…
2019
