It is well-known that interest rates are extremely persistent, yet they are best modeled and understood as stationary processes. These properties are contradictory in the workhorse Gaussian affine term structure model in which persistent data often result in unit roots that imply...

Interest rates vary with time horizons. This relationship, known as the term structure of interest rates or the yield curve, contains information about market expectations on future interest rates, inflation, and economic activity; risk attitudes; and recession probabilities. Understanding yield...

It is well-known that interest rates are extremely persistent, yet they are best modeled and understood as stationary processes. These properties are contradictory in the workhorse Gaussian affine term structure model in which the persistent data often result in unit roots that imply...

We propose a term structure model featuring double-autoregressive dynamics, which can accommodate unit roots and cointegrating relations while maintaining stationarity. In an empirical application, the model reduces in-sample misspecification and significantly improves out-of-sample yield...