The Svensson generalization of the popular Nelson-Siegel term structure model is widely used by practitioners and central banks. Unfortunately, like the original Nelson-Siegel specification, this generalization, in its dynamic form, does not enforce arbitrage-free consistency over time. Indeed,...

The movement of sovereign yields is important for both investment and risk management. In this paper, we apply a method that was first developed by Diebold et al (2006b) to model the sovereign bond yield curves of the US, Japan and Germany. By including observable macroeconomic variables and the...

This paper contains a statistical description of the whole U.S. forward rate curve (FRC), based on data from the period 1990-1996. We find that the average deviation of the FRC from the spot rate grows as the square- root of the maturity, with a proportionality constant which is comparable to...

Market models which re ect stylised properties of the interest rate term structure are widely used for modelling and pricing interest rate derivatives. We consider a market model involving the short rate and a diversied global stock index. We illustrate the stylised properties of the interest...