Hansen and Jagannathan (1997) compare misspecified asset pricing models based on least-square projections on a family of admissible stochastic discount factors. We extend their fundamental contribution by considering Minimum Discrepancy projections where misspecification is measured by a family...

In this paper, we study how different choices of loadings affect forecasting in the exponential term structure model proposed by Diebold and Li (2006). The loadings are defined through a specific parameter lambda which controls both the decaying speed of the slope as well as the maximum of the...

Recently, a myriad of factor models including macroeconomic variables have been proposed to analyze the yield curve. We present an alternative factor model where term structure movements are captured by Legendre polynomials mimicking the statistical factor movements identified by Litterman and...

There is strong empirical evidence that risk premia in long-term interest rates are time-varying. These risk premia critically depend on interest rate volatility, yet existing research has not examined the impact of time-varying volatility on excess returns for long-term bonds. To address this...

Recent empirical analysis of interest rate markets documents that bond demand and supply directly affect yield curve movements and bond risk premium. Motivated by those findings we propose a parametric interest rate model that allows for segmentation and local shocks in the term structure. We...