A0336
Title: Tail risk in government bond markets and ECB unconventional policies
Authors: Bernd Schwaab - European Central Bank (Germany) [presenting]
Xin Zhang - Sveriges Riksbank (Sweden)
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 and 2012, specifically 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.
