Spreij, Peter; Veerman, Enno; Vlaar, Peter - In: Applied Mathematical Finance 18 (2011) 4, pp. 331-352
We propose an affine macro-finance term structure model for interest rates that allows for both constant volatilities (homoskedastic model) and state-dependent volatilities (heteroskedastic model). In a homoskedastic model, interest rates are symmetric, which means that either very low interest...