This paper proposes a generalized arbitrage-free macro finance term structure model with both Nelson-Siegel latent yield factors and observable macro factors. Two subclasses are derived: spanned and unspanned models. In the spanned model, the yields are determined by both the Nelson-Siegel yield...

When pricing an in-arrears term structure product, the valuation usually boils down to determining the price of a vanilla product and of some additional part. To computer the price of the additional part, sometimes a specific term structure (like Gaussian or LIBOR) is assumed. Sometimes...

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...