the discount rate function directly to bond prices. ; The tests demonstrate the dangers of in-sample goodness-of-fit as … detect misspecification of the underlying pricing equation relating the term structure to bond prices. These tests establish … the presence of unspecified, but nonetheless systematic, omitted factors in the prices of long maturity notes and bonds …

of the short rate itself. Besides bond and bond futures, the model yields analytical solutions for prices of European … observations of a chosen short rate/bond prices. Another advantage of our discrete-time model is that for derivatives like average … implied volatilities from the Black model (a one-factor model) for options on discount bonds exhibit a smirk if option prices …

The prices for callable U.S. Treasury securities provide the sole source of evidence concerning the implied volatility … of interest rates over the extended 1926-1994 period. This paper uses the prices of callable as well as non …