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http://ssrn.com/abstract=2235840
 
 

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Risk Premia in Gold Lease Rates


Anh Le


University of North Carolina Kenan-Flagler Business School

Haoxiang Zhu


Massachusetts Institute of Technology (MIT) - Sloan School of Management

October 21, 2013

UNC Kenan-Flagler Research Paper No. 2013-16
Finance Down Under 2014 Building on the Best from the Cellars of Finance

Abstract:     
Gold is an important global reserve asset, widely held by the official sector and private investors. In this paper, we study a measure of the opportunity costs of holding gold, the gold lease rates -- interests paid in gold for borrowing gold. Gold lease rates are economically significant in magnitude and display substantial variations over time. Using a term structure model with "unspanned" risk factors, we find that risk premia in gold lease rates are highly time-varying and strongly increasing in the level and slope of gold lease rates, as well as in gold volatility. Expected excess returns of "gold bonds" are mostly positive, suggesting that they are perceived as risky investments.

Number of Pages in PDF File: 41

Keywords: gold lease rates, risk premia, term structure, unspanned risk

JEL Classification: G12

working papers series


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Date posted: March 20, 2013 ; Last revised: October 31, 2013

Suggested Citation

Le, Anh and Zhu, Haoxiang, Risk Premia in Gold Lease Rates (October 21, 2013). UNC Kenan-Flagler Research Paper No. 2013-16; Finance Down Under 2014 Building on the Best from the Cellars of Finance. Available at SSRN: http://ssrn.com/abstract=2235840 or http://dx.doi.org/10.2139/ssrn.2235840

Contact Information

Anh Le
University of North Carolina Kenan-Flagler Business School ( email )
McColl Building
Chapel Hill, NC 27599-3490
United States

Haoxiang Zhu (Contact Author)
Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )
50 MEMORIAL DRIVE
E62-416
Cambridge, MA 02142-1347
United States
HOME PAGE: http://www.mit.edu/~zhuh
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