New model reveals market risk's impact on term premiums, challenging expectations.
The article discusses a new model that challenges the idea that future interest rates can be predicted accurately. The model suggests that term premiums exist and can change over time. It uses two factors, short-term interest rates, and market risk, to explain these premiums. For short-term investments, interest rates play a bigger role in determining premiums, while market risk becomes more important for longer-term investments.