Toczydlowska, Dorota; Peters, Gareth - In: Econometrics : open access journal 6 (2018) 3, pp. 1-45
A novel class of dimension reduction methods is combined with a stochastic multi-factor panel regression-based state-space model in order to model the dynamics of yield curves whilst incorporating regression factors. This is achieved via Probabilistic Principal Component Analysis (PPCA) in which...