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Bond futures, inflation-indexed bonds, and inflation risk premium

Kanas, Angelos (2014) Bond futures, inflation-indexed bonds, and inflation risk premium. Journal of International Financial Markets, Institutions and Money, 28 (1). pp. 82-99. ISSN 1042-4431. (doi:10.1016/j.intfin.2013.09.007) (The full text of this publication is not currently available from this repository. You may be able to access a copy if URLs are provided)

The full text of this publication is not currently available from this repository. You may be able to access a copy if URLs are provided. (Contact us about this Publication)
Official URL
http://dx.doi.org/10.1016/j.intfin.2013.09.007

Abstract

We propose a new approach to measuring long-run inflation risk, the inflation risk premium, and inflation expectations for the UK over the period 1985-2012. By adding long-term bond futures to the information set of inflation-indexed and nominal bonds, inflation risk is measured as an incremental time-varying covariance obtained from a trivariate GARCH model with dynamic conditional correlations (DCC). The time-varying inflation risk premium and inflation expectations are extracted from the breakeven yield using the risk premium obtained from the previous step. We find that the risk premium has been decreasing over the sample period, with an average value of 87 basis points. The estimated long-run inflation expectations suggest that credibility has been improving over the period of inflation targeting policy, and are in line with the role of inflation targeting policy in anchoring expectations. © 2013 Elsevier B.V.

Item Type: Article
DOI/Identification number: 10.1016/j.intfin.2013.09.007
Additional information: Unmapped bibliographic data: AD - Department of Economics, University of Piraeus, Greece [Field not mapped to EPrints] JA - J. Int. Financ. Mark. Inst. Money [Field not mapped to EPrints]
Uncontrolled keywords: Bond futures, Inflation expectations, Inflation risk premium, Inflation targeting, Inflation-indexed bonds
Subjects: H Social Sciences > HG Finance
Divisions: Faculties > Social Sciences > Kent Business School > Accounting and Finance
Depositing User: Tracey Pemble
Date Deposited: 22 May 2014 10:45 UTC
Last Modified: 29 May 2019 12:36 UTC
Resource URI: https://kar.kent.ac.uk/id/eprint/41120 (The current URI for this page, for reference purposes)
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