Dai, Qiang; Singleton, Kenneth J.; Yang, Wei - In: Review of Financial Studies 20 (2007) 5, pp. 1669-1706
This article develops and empirically implements an arbitrage-free, dynamic term structure model with 'priced' factor and regime-shift risks. The risk factors are assumed to follow a discrete-time Gaussian process, and regime shifts are governed by a discrete-time Markov process with...