B0402
Title: Tail risk in government bond markets and ECB unconventional policies
Authors: Xin Zhang - Sveriges Riksbank (Sweden)
Bernd Schwaab - European Central Bank (Germany) [presenting]
Abstract: A novel observation-driven model is derived to study the time variation in the tail shape for time series observations from a wide class of fat-tailed distributions. Monte Carlo experiments suggest that the model reliably captures tail shape variation in a variety of simulation settings. In an empirical study of sovereign bond yields at a high frequency, we demonstrate that unconventional monetary policies adopted by the European Central Bank between 2010-2012, specially its Securities Markets Programme and Outright Monetary Transactions, lowered the tail risk associated with holding certain sovereign bonds during the euro area sovereign debt crisis.
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