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...

This paper examines the pricing of interest rate derivatives when the interest rate dynamics experience infrequent jump shocks modelled as a Poisson process. The pricing framework adapted was developed by Chiarella and Nikitopoulos to provide an extension of the Heath, Jarrow and Morton model to...