Empirical modeling of the yield curve is often inconsistent with absence of arbitrage. In fact, many parsimonious models, like the popular Nelson-Siegel model, are inconsistent with absence of arbitrage. In other cases, arbitrage-free models are often used in inconsistent ways by recalibrating...

Empirical modeling of the yield curve is often inconsistent with absence of arbitrage. In fact, many parsimonious models, like the popular Nelson-Siegel model, are inconsistent with absence of arbitrage. In other cases, arbitrage-free models are often used in inconsistent ways by recalibrating...

We present a new framework for the joint estimation of the default-free government term structure and corporate credit spread curves. By using a data set of liquid, German mark denominated bonds, we show that this yields more realistic spreads than traditionally obtained spread curves that...