Discrete time Wishart term structure models
This paper reveals that the class of Affine Term Structure Models (ATSMs) introduced by Duffie and Kan (1996) is larger than previously considered in the literature. In the framework of risk factors following a Wishart autoregressive process, we define the Wishart Term Structure Model (WTSM) as an extension of a subclass of Quadratic Term Structure Models (QTSMs), derive simple parameter restrictions that ensure positive bond yields at all maturities, and observe that the usual constraint on affine processes requiring that the volatility matrix be diagonal up to a path independent linear invertible transformation can be considerably relaxed.
Year of publication: |
2011
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Authors: | Gourieroux, Christian ; Sufana, Razvan |
Published in: |
Journal of Economic Dynamics and Control. - Elsevier, ISSN 0165-1889. - Vol. 35.2011, 6, p. 815-824
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Publisher: |
Elsevier |
Keywords: | Affine term structure Quadratic term structure CAR process Affine process Wishart process |
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