We develop a parsimonious arbitrage-free yield net model for consistent bond pricing across maturities and issuers. Containing a core curve and multiple periphery curves, the yield net is spanned by three layers of factors: base factors spanning all curves, common spread factors spanning all...

A fiscal shock due to a shift in taxes or in government spending will, at some point in time, constrain the future path of taxes and spending, since the government’s intertemporal budget constraint will eventually have to be met. This simple fact is surprisingly overlooked in analyses of the...