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This paper was accepted by Wei Xiong, finance.
In this book, two of America's leading economists provide the first integrated treatment of the conceptual, practical, and empirical foundations for credit risk pricing and risk measurement. ...Masterfully applying theory to practice, Darrell Duffie and Kenneth Singleton model credit risk for the purpose of measuring portfolio risk and pricing defaultable bonds, credit derivatives, and other securities exposed to credit risk. The methodological rigor, scope, and sophistication of their state-of-the-art account is unparalleled, and its singularly in-depth treatment of pricing and credit derivatives further illuminates a problem that has drawn much attention in an era when financial institutions the world over are revising their credit management strategies.
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Learning From Disagreement in the U.S. Treasury Bond Market GIACOLETTI, MARCO; LAURSEN, KRISTOFFER T.; SINGLETON, KENNETH J.
The Journal of finance (New York),
February 2021, 2021-02-00, 20210201, Letnik:
76, Številka:
1
Journal Article
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ABSTRACT
We study risk premiums in the U.S. Treasury bond market from the perspective of a Bayesian econometrician BLwho learns in real time from disagreement among investors about future bond ...yields. Notably, disagreement has substantial predictive power for yields, and BL's risk premiums are less volatile than those in the analogous model without learning. BL's forecasts are substantially more accurate than the consensus forecasts of market professionals, particularly following U.S. recessions. The predictive power of disagreement is distinct from the (much weaker) one of inflation and output growth. Rather, it appears to reflect uncertainty about future fiscal policy.
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