Risk Premium of Russian Domestic Government Bonds

Student: Zimniakova Valeriia

Faculty: Faculty of Economics, Management, and Business Informatics

Educational Programme: Finance (Master)

Year of Graduation: 2017

This paper considers a return forecasting factor (CP), proposed by Cochrane and Piazessi (2005) as a method of measuring the term premium of Russian government bonds for the period from 2003 to 2017. The variation in term premium is mostly accounted for through the expectations of short-term interest rates, implied by the level of current forward rates. The model has rejected the expectation hypothesis about the unpredictability of term premium. The paper concluded that the level of term premium is significantly determined by the expectations of future short-term rates changes. Key Words: bond risk premium, government zero-coupon bonds, expectation theory, term structure of interest rates

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