{
  "title": "Volatility and Jump Risk Premia in Emerging Market Bonds",
  "publication": "IMF Working Papers, July 1, 2007",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2016/12/31/volatility-and-jump-risk-premia-in-emerging-market-bonds-21124",
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  "summary": "There is strong evidence that interest rates and bond yield movements exhibit both stochastic volatility and unanticipated jumps. The presence of frequent jumps makes it natural to ask whether there is a premium for jump risk embedded in observed bond yields.",
  "sections": [
    {
      "heading": "Summary",
      "content": "- Strong evidence that interest rates and bond yield movements exhibit both stochastic volatility and unanticipated jumps.\n- Frequent jumps raise the question whether a premium for jump risk is embedded in observed bond yields.\n- The paper identifies a class of jump-diffusion models that successfully approximate the term structure of interest rates of emerging markets.\n- Parameters of the term structure are reconciled with associated bond yields by estimating volatility and jump risk premia in highly volatile markets."
    },
    {
      "heading": "Methods and Model Evaluation",
      "content": "- Estimation approach: simulated method of moments (SMM).\n- Model class: jump-diffusion models with stochastic volatility and unanticipated jumps.\n- Finding on model adequacy: all variants of models that do not incorporate stochastic volatility and unanticipated jumps cannot generate the non-normalities consistent with observed interest rates."
    },
    {
      "heading": "Key Quantitative Results",
      "content": "- Jumps occur (8,10) times a year in Argentina and Brazil, respectively.\n- The size and variance of these jumps is reported as statistically significant.\n- Pages: 25\n- Volume: 2007\n- Issue: 172\n- Series: Working Paper No. 2007/172\n- DOI: https://doi.org/10.5089/9781451867367.001\n- Stock No: WPIEA2007172\n- ISBN: 9781451867367\n- ISSN: 1018-5941\n- Publication date: July 1, 2007"
    },
    {
      "heading": "Subject Areas and Keywords",
      "content": "- Subject: Asset prices, Interest rate modelling, Market interest rates, Short term interest rates, Yield curve\n- Keywords: Brady bond, risk premium, stochastic model, time series, WP\n\nSource: \"Volatility and Jump Risk Premia in Emerging Market Bonds\", IMF Working Paper (2007/172) by John J Matovu.\n\n---\n\n Content in this bundle\n\n- 1. SNP Auxilliary Model\n  - 1. SNP Auxilliary Model (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - 1. SNP Auxilliary Model (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/31/volatility-and-jump-risk-premia-in-emerging-market-bonds-21124"
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    "Authors: John J Matovu",
    "Published: July 1, 2007",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781451867367.001",
    "Strong evidence that interest rates and bond yield movements exhibit both stochastic volatility and unanticipated jumps.",
    "Frequent jumps raise the question whether a premium for jump risk is embedded in observed bond yields.",
    "The paper identifies a class of jump-diffusion models that successfully approximate the term structure of interest rates of emerging markets.",
    "Parameters of the term structure are reconciled with associated bond yields by estimating volatility and jump risk premia in highly volatile markets.",
    "Estimation approach: simulated method of moments (SMM).",
    "Model class: jump-diffusion models with stochastic volatility and unanticipated jumps.",
    "Finding on model adequacy: all variants of models that do not incorporate stochastic volatility and unanticipated jumps cannot generate the non-normalities consistent with observed interest rates.",
    "Jumps occur (8,10) times a year in Argentina and Brazil, respectively.",
    "The size and variance of these jumps is reported as statistically significant.",
    "Pages: 25",
    "Volume: 2007",
    "Issue: 172",
    "Series: Working Paper No. 2007/172",
    "DOI: https://doi.org/10.5089/9781451867367.001",
    "Stock No: WPIEA2007172",
    "ISBN: 9781451867367",
    "ISSN: 1018-5941",
    "Publication date: July 1, 2007",
    "Subject: Asset prices, Interest rate modelling, Market interest rates, Short term interest rates, Yield curve",
    "Keywords: Brady bond, risk premium, stochastic model, time series, WP",
    "**1. SNP Auxilliary Model**"
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