We evaluate the statistical and economic differences between affine term-structure models. Despite the voluminous literature on this subject, we have a limited understanding of those structural features of the models that are important in practice. Given that the key distinguishing...

Unspanned stochastic volatility (USV) refers to the inability of bonds to replicate volatility-sensitive derivative securities. Affine term structure models require special restrictions on the parameters to exhibit USV. We use a joint Eurodollar futures and options data set to estimate affine...