We derive the discrete-time arbitrage-free Nelson-Siegel class of term structure models with an exact solution and proof of uniqueness. We design a fast and reliable estimation procedure based on reduced-dimension optimization with multistep embedded regressions. After an analytical...

In this paper we develop new dynamic factor models to forecast multiple yield curves. Our methodology is based on a thorough empirical study of daily tenor-dependent term structures over the time period 2005-2017 which reveals important cross-tenor dependencies of yields. The suggested...

We suggest using "realized volatility" as a volatility proxy to aid in model-based multivariate bond yield density forecasting. To do so, we develop a general estimation approach to incorporate volatility proxy information into dynamic factor models with stochastic volatility. The resulting...

The dynamic behaviour of the term structure of interest rates is difficult to replicate with models, and even models with a proven track record of empirical performance have underperformed since the early 2000s. On the other hand, survey expectations are accurate predictors of yields, but only...

The dynamic behavior of the term structure of interest rates is difficult to replicate with models, and even models with a proven track record of empirical performance have underperformed since the early 2000s. On the other hand, survey expectations are accurate predictors of yields, but only...

In this paper we develop a new way of modelling time variation in term premia. This is based on the stochastic discount factor model of asset pricing with observable macroeconomic factors. The joint distribution of excess holding period US bond returns of different maturity and the fundamental...

We characterize the discrete-time arbitrage-free Nelson-Siegel term structure model, prove the uniqueness of the solution for model identification, make specification analysis on its canonical form, and detail the MCMC estimation method with a fast and reliable prior extraction step. Using the...

We introduce a Nelson-Siegel type interest rate term structure model with the underlying yield factors following autoregressive processes revealing time-varying stochastic volatility. The factor volatilities capture risk inherent to the term structure and are associated with the time-varying...

We estimate a model with latent factors that summarize the yield curve (namely, level, slope, and curvature) as well as observable macroeconomic variables (real activity, inflation, and the stance of monetary policy). Our goal is to provide a characterization of the dynamic interactions between...

Using the government's intertemporal budget constraint, we quantify the contribution of returns paid on the U.S. government's debt portfolio to the evolution of the debt-to-GDP ratio. We show that announcements of unconventional monetary policy measures by the Federal Reserve between 2008.IV and...