This paper studies empirical issues of one-factor yield curve models. We focus on the models by Ho & Lee (1986), Hull & White (1990) and Moraleda & Vorst (1996). To be consistent in the comparison of the models, we derive them all within the Ritkchen and Sankarasubramanian (1995) framework,...

Champions of sustainable growth often call for more durable production technologies with less capital depreciation. As investment in more durable capital is encouraged by lower interest rates, we investigate whether policy makers can steer the economy towards a path with low interest rates in...

We propose a novel observation-driven dynamic finite mixture model for the study of banking data. The model accommodates time-varying component means and covariance matrices, normal and Student's $t$ distributed mixtures, and economic determinants of time-varying parameters. Monte Carlo...

Recent empirical studies on interest rate derivatives have shown that the volatil- ity structure of interest rates is frequently humped. Mercurio and Moraleda (1996) and Moraleda and Vorst (1996a) have modelled interest rate dynamics in such a way that humped volatility structures are possible...

We empirically investigate why wholesale funding is fragile by providing the first study of how individual banks borrow and lend in the euro unsecured and secured interbank market. Consistent with theories in which lenders enforce market discipline by monitoring counterparty credit risk and...

Pensions may be provided for in a modern society by several methods, viz., voluntary individual savings, mandatory fully funded occupational pension systems, and mandatory social security financed by pay-as-you-go. The specific mixture of the three systems we will call the pension composition....

In this paper I examine various extensions of the Nelson and Siegel (1987) model with the purpose of fitting and forecasting the term structure of interest rates. As expected, I find that using more flexible models leads to a better in-sample fit of the term structure. However, I show that the...