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Contribution Details
| Type | Journal Article |
| Scope | Discipline-based scholarship |
| Title | Design and Estimation of Quadratic Term Structure Models |
| Organization Unit | |
| Authors |
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| Item Subtype | Original Work |
| Refereed | Yes |
| Status | Published in final form |
| Language |
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| Journal Title | Review of Finance |
| Publisher | Oxford University Press |
| Geographical Reach | international |
| ISSN | 1572-3097 |
| Volume | 7 |
| Number | 1 |
| Page Range | 47 - 73 |
| Date | 2003 |
| Abstract Text | We consider the design and estimation of quadratic term structure models. We start with a list of stylized facts on interest rates and interest rate derivatives, classified into three layers: (1) general statistical properties, (2) forecasting relations, and (3) conditional dynamics. We then investigate the implications of each layer of property on model design and strive to establish a mapping between evidence and model structures. We calibrate a two-factor model that approximates these three layers of properties well, and show that a flexible specification for the market price of risk is important in capturing the stylized evidence in forecasting relations while factor interactions are indispensable in generating the hump-shaped dynamics of bond yields. |
| Free access at | Official URL |
| Digital Object Identifier | 10.1023/A:1022502724886 |
| Other Identification Number | merlin-id:8809 |
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