Standard approaches to building and estimating dynamic term structure models rely on the assumption that yields can serve as the factors. However, the assumption is neither theoretically necessary nor empirically supported. This paper documents that almost half of the variation in bond risk...

Conditional maximum Sharpe ratios implied by fully flexible four-factor and five-factor Gaussian term structure models are astronomically high. Estimation of term structure models subject to a constraint on their Sharpe ratios uncovers properties that hold for a wide range of Sharpe ratios....

Many studies estimate the impact of exposure to some quasi-experimental policy or event using a panel event study design. These models, as a generalized extension of 'difference-in-differences' or two-way fixed effect models, allow for dynamic lags and leads to the event of interest to be...

A good description of the dynamics of interest rates is crucial to price derivatives and to hedge corresponding risk. Interest rate modelling in an unstable macroeconomic context motivates one factor models with time varying parameters. In this paper, the local parameter approach is introduced...

In this paper we estimate the term structure of daily UK interest rates using more flexible continuous time models. The multivariate CKLS framework is employed for dynamic estimation and forecasting of four classical models over the eventful period of 2000-2013. The extensions are applied in two...

Portfolio sorting is ubiquitous in the empirical finance literature, where it has been widely used to identify pricing anomalies in different asset classes. Despite the popularity of portfolio sorting, little attention has been paid to the statistical properties of the procedure or to the...

This paper develops a method to select the threshold in threshold-based jump detection methods. The method is motivated by an analysis of threshold-based jump detection methods in the context of jump-diffusion models. We show that over the range of sampling frequencies a researcher is most...