Bruno Feunou - Latest

• U.S. Macroeconomic News and Low-Frequency Changes in Small Open Economies’ Bond Yields

  Staff Working Paper 2024-12 Bingxin Ann Xing, Bruno Feunou, Morvan Nongni-Donfack, Rodrigo Sekkel

  Using two complementary approaches, we investigate the importance of U.S. macroeconomic news in driving low-frequency fluctuations in the term structure of interest rates in Canada, Sweden and the United Kingdom. We find that U.S. macroeconomic news is particularly important to explain changes in the expectation components of the nominal, real and break-even inflation rates of small open economies.

  Content Type(s): Staff research, Staff working papers Research Topic(s): Central bank research, Econometric and statistical methods JEL Code(s): E, E4, E43, E44, E47, G, G1, G14

• Generalized Autoregressive Gamma Processes

  Staff Working Paper 2023-40 Bruno Feunou

  We introduce generalized autoregressive gamma (GARG) processes, a class of autoregressive and moving-average processes in which each conditional moment dynamic is driven by a different and identifiable moving average of the variable of interest. We show that using GARG processes reduces pricing errors by substantially more than using existing autoregressive gamma processes does.

  Content Type(s): Staff research, Staff working papers Research Topic(s): Asset pricing, Econometric and statistical methods JEL Code(s): C, C5, C58, G, G1, G12

• Secular Economic Changes and Bond Yields

  Staff Working Paper 2021-14 Bruno Feunou, Jean-Sébastien Fontaine

  We investigate the economic forces behind the secular decline in bond yields. Before the anchoring of inflation in the mid-1990s, nominal shocks drove inflation, output and bond yields. Afterward, the impacts of nominal shocks were much less significant.

  Content Type(s): Staff research, Staff working papers Research Topic(s): Asset pricing, Econometric and statistical methods, Interest rates, Monetary policy and uncertainty, Potential output JEL Code(s): E, E4, E43, G, G1, G12

• The Term Structures of Loss and Gain Uncertainty

  Staff Working Paper 2020-19 Bruno Feunou, Ricardo Lopez Aliouchkin, Roméo Tedongap, Lai Xu

  We investigate the uncertainty around stock returns at different investment horizons. Since a return is either a loss or a gain, we categorize return uncertainty into two components—loss uncertainty and gain uncertainty. We then use these components to evaluate investment.

  Content Type(s): Staff research, Staff working papers Research Topic(s): Asset pricing, Econometric and statistical methods JEL Code(s): G, G1, G12

• Which Model to Forecast the Target Rate?

  Staff Working Paper 2017-60 Bruno Feunou, Jean-Sébastien Fontaine, Jianjian Jin

  Specifications of the Federal Reserve target rate that have more realistic features mitigate in-sample over-fitting and are favored in the data.

  Content Type(s): Staff research, Staff working papers Research Topic(s): Financial markets, Interest rates JEL Code(s): E, E4, E43

• Variance Premium, Downside Risk and Expected Stock Returns

  Staff Working Paper 2017-58 Bruno Feunou, Ricardo Lopez Aliouchkin, Roméo Tedongap, Lai Xi

  We decompose total variance into its bad and good components and measure the premia associated with their fluctuations using stock and option data from a large cross-section of firms.

  Content Type(s): Staff research, Staff working papers Research Topic(s): Asset pricing, Financial markets JEL Code(s): G, G1, G12

• Risk-Neutral Moment-Based Estimation of Affine Option Pricing Models

  Staff Working Paper 2017-55 Bruno Feunou, Cédric Okou

  This paper provides a novel methodology for estimating option pricing models based on risk-neutral moments. We synthesize the distribution extracted from a panel of option prices and exploit linear relationships between risk-neutral cumulants and latent factors within the continuous time affine stochastic volatility framework.

  Content Type(s): Staff research, Staff working papers Research Topic(s): Asset pricing, Econometric and statistical methods JEL Code(s): G, G1, G12

• Good Volatility, Bad Volatility and Option Pricing

  Staff Working Paper 2017-52 Bruno Feunou, Cédric Okou

  Advances in variance analysis permit the splitting of the total quadratic variation of a jump diffusion process into upside and downside components. Recent studies establish that this decomposition enhances volatility predictions, and highlight the upside/downside variance spread as a driver of the asymmetry in stock price distributions.

  Content Type(s): Staff research, Staff working papers Research Topic(s): Asset pricing, Econometric and statistical methods JEL Code(s): G, G1, G12

• Time-Varying Crash Risk: The Role of Stock Market Liquidity

  Staff Working Paper 2016-35 Peter Christoffersen, Bruno Feunou, Yoontae Jeon, Chayawat Ornthanalai

  We estimate a continuous-time model with stochastic volatility and dynamic crash probability for the S&P 500 index and find that market illiquidity dominates other factors in explaining the stock market crash risk. While the crash probability is time-varying, its dynamic depends only weakly on return variance once we include market illiquidity as an economic variable in the model.

  Content Type(s): Staff research, Staff working papers Research Topic(s): Asset pricing, Econometric and statistical methods, Financial stability JEL Code(s): G, G0, G01, G1, G12

• Tractable Term Structure Models

  Staff Working Paper 2015-46 Bruno Feunou, Jean-Sébastien Fontaine, Anh Le, Christian Lundblad

  We introduce a new framework that facilitates term structure modeling with both positive interest rates and flexible time-series dynamics but that is also tractable, meaning amenable to quick and robust estimation.

  Content Type(s): Staff research, Staff working papers Research Topic(s): Asset pricing, Interest rates, International financial markets, International topics, Monetary policy and uncertainty, Monetary policy transmission JEL Code(s): G, G1, G12