This paper evaluates the robustness of UK bond term premia from affine term structure models. We show that this approach is able to match standard specification tests. In addition, term premia display countercyclical behaviour and are positively related to uncertainty about future inflation,...

The illiquidity of long-maturity options has made it difficult to study the term structures of option spanning portfolios. This paper proposes a new estimation and inference framework for these option-implied term structures that addresses long-maturity illiquidity. By building a sieve estimator...

The author proposes a test for the parametric specification of each component in the diffusion matrix of a d-dimensional diffusion process. Overall, d (d-1)/2 test statistics are constructed for the off-diagonal components, while d test statistics are constructed for the main diagonal...

This paper proposes a novel regression-based approach to the estimation of Gaussian dynamic term structure models that avoids numerical optimization. This new estimator is an asymptotic least squares estimator defined by the no-arbitrage conditions upon which these models are built. We discuss...

Since the seminal paper of Vasicek and Fong (1982), the term structures of interest rates have been fitted assuming that yields are cross-sectionally homoskedastic. We show that this assumption does not hold when there are differences in liquidity, even for bonds of the same issuer. Lower...

We propose no-arbitrage term structure models in which the volatility factors followGARCH processes. The models’ tractability is similar to that of canonical affine termstructure models, but they capture the conditional variances of yields much more accurately.We estimate a model with one...

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...

This paper provides an econometric analysis of parameter estimation for continuous-time affine term structure models that are driven by latent diffusions. Simulating an affine two factor short rate model where one process is Gaussian and the other factor is square root we perform a comparison...

In this paper we propose a Libor model with a high-dimensional specially structured system of driving CIR volatility processes. A stable calibration prodecure which takes into account a given local correlation structure is presented. The calibration algorithm is FFT based, so fast and easy to...

We develop a model that can match two stylized facts of the term-structure. The first stylized fact is the predictability of excess returns on long-term bonds. Modeling this requires sufficient volatility and persistence in the price of risk. The second stylized fact is that long-term yields are...