Most affine models of the term structure with stochastic volatility (SV) predict that the variance of the short rate is …;unspanned stochastic volatility (USV).quot; Of the models tested, only the A1(4) USV model is found to generate both realistic volatility … estimates and a good cross-sectional fit. Our findings suggests that interest rate volatility cannot be extracted from the cross …

Gaussian affine term structure models attribute time‐varying bond risk premia to changing risk prices driven by the … conditional means of the risk factors, while structural models with recursive preferences credit it to stochastic volatility. We … model with recursive preferences. Our model is affine and has analytical bond prices making it empirically tractable. We use …