We propose an affine term structure model which accommodates non-linearities in the drift and volatility function of the short-term interest rate. Such non-linearities are a consequence of discrete beta-distributed regime shifts constructed on multiple thresholds. We derive iterative closed form...

We develop a multivariate dynamic term structure model, which takes into account the nonlinear (time-varying) relation between interest rates and the state of the economy. In contrast to the classical term structure literature, in which nonlinearities are captured by increasing the number of...