Topic: Dynamics of the Expectation and Risk Premium in the OIS Term Structure

Speaker: Zhenyu Wang, Professor of Business Finance, Kelley School of Business, Indiana University

Date: September 14th (Wednesday.)

Time: 2:30-4:00pm

Location: Building 4, Room 101

Language: English

Abstract:

We show the dynamics of the expectation and risk premium in the short-term OIS curve. The market expectation drove the OIS curve during 2002–2015 and caused the curve to invert before the Great Recession. The risk premium was rising before the global financial crisis and peaked in the early stage of the crisis. The Fed’s monetary policy lagged behind the market expectation before the crisis and moved ahead the expectation during the crisis. We introduce dynamic term structure models to incorporate a database of daily public information on the FOMC meeting schedule, which proves crucial for understanding the OIS curve.

About the speaker:

Zhenyu Wang is Professor of Business Finance and Edward E. Edwards Professor at the Kelley School of Business in Indiana University. He was formerly a Vice President at the Federal Reserve Bank of New York, where he was the Head of Financial Intermediation Function. Before joining the Fed, he had been a tenured faculty member at the University of Texas at Austin and an associate professor at Columbia University. Professor Wang specializes in financial markets, financial intermediation, derivatives securities, risk management, portfolio management, and financial econometrics. He has published research papers in top finance journals including the Journal of Finance, the Review of Financial Studies, the Journal of Financial Economics, and Management Science. He won the American Association of Individual Investors Award for Best Paper on Investments at the Western Finance Association Meeting in 1994.