The object of this paper is to test several familiar hypotheses about the relationship between the forward rates implied by the term structure and interest rate expectations, using the one ongoing systematic survey that samples market participants' expectations. The substitution of survey data...

This paper studies the market price of credit risk incorporated into one of the most important credit spreads in the financial markets: interest rate swap spreads. Our approach consists of jointly modeling the swap and Treasury term structures using a general five-factor affine credit framework...

We consider the patterns in the predictability of interest rates expectations hypothesis (EH), and attempt to account for them with affine models. We make the following points: (i) Discrepancies in the data from the EH take a particularly simple form with forward rates: as theory suggests, the...

We propose a nonparametric estimation procedure for continuous- time stochastic models. Because prices of derivative securities depend crucially on the form of the instantaneous volatility of the underlying process, we leave the volatility function unrestricted and estimate it nonparametrically....

As is widely recognized, real interest rates in the early 1980s were at peaks not witnessed since the late 1920s. Less well perceived is the sharp decline in real interest rates since 1984. By 1986-88, real interest rates were back at their average levels of the previous quarter century. This...

This paper studies U.S. banks' exposure to interest rate and credit risk. We exploit the factor structure in interest rates to represent many bank positions in terms of simple factor portfolios. This approach delivers time varying measures of exposure that are comparable across banks as well as...