Specification Analysis of Affine Term Structure Models
Title | Specification Analysis of Affine Term Structure Models PDF eBook |
Author | Qiang Dai |
Publisher | |
Pages | 51 |
Release | 1997 |
Genre | Geometry, Affine |
ISBN |
This paper characterizes, interprets, and tests the over-identifying restrictions imposed in affine models of the term" structure. Letting r(t) = ë Y(t), where Y is an unobserved vector affine process, our analysis proceeds in three steps. First, we show that affine models can be categorized according to the different over-identifying restrictions they impose on (i) ë, and (ii) the parameters of the diffusion matrices. Second, this formulation is shown to be equivalent to a model in which there is a terraced drift structure with one of the state variables being the stochastic long-run mean of r. This equivalence allows direct comparisons of the substantive restrictions on the dynamics of interest rates imposed in CIR-style models and models in which the state variables are the stochastic long-run mean and volatility of r. Third, we compute simulated method of moments estimates of a three-factor affine term structure model, and test the over-identifying restrictions on the joint distribution of long- and short-term interest rates implied by extant affine models of r. We find allowing for correlated factors is key to simultaneously describing the short and long ends of the yield curve. This finding is interpreted in terms of the properties of the risk factors underlying term structure movements
Direct Estimation of the Risk Neutral Factor Dynamics of Affine Term Structure Models
Title | Direct Estimation of the Risk Neutral Factor Dynamics of Affine Term Structure Models PDF eBook |
Author | Dennis Bams |
Publisher | |
Pages | 54 |
Release | 1998 |
Genre | Affine algebraic groups |
ISBN |
Affine Term Structure Models
Title | Affine Term Structure Models PDF eBook |
Author | Christian Gouriéroux |
Publisher | |
Pages | 66 |
Release | 2002 |
Genre | |
ISBN |
The Affine Arbitrage-Free Class of
Title | The Affine Arbitrage-Free Class of PDF eBook |
Author | Jens Henrik Eggert Christensen |
Publisher | |
Pages | 38 |
Release | 2010 |
Genre | |
ISBN |
We derive the class of arbitrage-free affine dynamic term structure models that approximate the widely-used Nelson-Siegel yield-curve specification. Our theoretical analysis relates this new class of models to the canonical representation of the three-factor arbitrage-free affine model. Our empirical analysis shows that imposing the Nelson-Siegel structure on this canonical representation greatly improves its empirical tractability; furthermore, we find that improvements in predictive performance are achieved from the imposition of absence of arbitrage.
On the Estimation of Term Structure Models and An Application to the United States
Title | On the Estimation of Term Structure Models and An Application to the United States PDF eBook |
Author | International Monetary Fund |
Publisher | International Monetary Fund |
Pages | 64 |
Release | 2010-11-01 |
Genre | Business & Economics |
ISBN | 1455209589 |
This paper discusses the estimation of models of the term structure of interest rates. After reviewing the term structure models, specifically the Nelson-Siegel Model and Affine Term- Structure Model, this paper estimates the terms structure of Treasury bond yields for the United States with pre-crisis data. This paper uses a software developed by Fund staff for this purpose. This software makes it possible to estimate the term structure using at least nine models, while opening up the possibility of generating simulated paths of the term structure.
Term-Structure Models
Title | Term-Structure Models PDF eBook |
Author | Damir Filipovic |
Publisher | Springer Science & Business Media |
Pages | 259 |
Release | 2009-07-28 |
Genre | Mathematics |
ISBN | 3540680152 |
Changing interest rates constitute one of the major risk sources for banks, insurance companies, and other financial institutions. Modeling the term-structure movements of interest rates is a challenging task. This volume gives an introduction to the mathematics of term-structure models in continuous time. It includes practical aspects for fixed-income markets such as day-count conventions, duration of coupon-paying bonds and yield curve construction; arbitrage theory; short-rate models; the Heath-Jarrow-Morton methodology; consistent term-structure parametrizations; affine diffusion processes and option pricing with Fourier transform; LIBOR market models; and credit risk. The focus is on a mathematically straightforward but rigorous development of the theory. Students, researchers and practitioners will find this volume very useful. Each chapter ends with a set of exercises, that provides source for homework and exam questions. Readers are expected to be familiar with elementary Itô calculus, basic probability theory, and real and complex analysis.
Affine Term Structure Models: Theory, Characterization, and Estimation
Title | Affine Term Structure Models: Theory, Characterization, and Estimation PDF eBook |
Author | Anders Brandt Wulff-Andersen |
Publisher | |
Pages | 100 |
Release | 2000 |
Genre | |
ISBN |