This paper develops a rich class of discrete-time, nonlinear dynamic term structure models (DTSMs). Under the risk-neutral measure, the distribution of the state vector Xt resides within a family of discrete-time affine processes that nests the exact discrete-time counter-parts of the entire...

This paper characterizes, interprets, and tests the over-identifying restrictions imposed in affine models of the termquot; structure. Letting r(t) = euml; Y(t), where Y is an unobserved vector affine process, our analysis proceeds in three steps. First, we show that affine models can be...