New paper on skewness in interest rates

Mike Chernov and I have written a paper on the information content in option-implied skewness. We find that conditional skewness is closely related to financial conditions and monetary policy, but contains substantial additional predictive power for future interest rates, bond returns, and survey forecast errors. Our findings can be rationalized in a simple model with biased beliefs.

The paper is available here.

Michael D. Bauer
Financial Economist

My research areas are financial economics, monetary economics and time series econometrics.