Time Series and Cross-Section Information in Affine Term-Structure Models
AbstractIn this article I provide an empirical analysis of the term structure of interest rates using the affine class of term-structure models introduced by Duffie and Kan. I estimate these models by combining time series and cross-section information in a theoretically consistent way. In the estimation I use a Kalman filter based on a discretization of the continuous-time factor process and allow for a general measurement-error structure. I provide evidence that a three-factor affine model with correlated factors is able to provide an adequate fit of the cross-section and the dynamics of the term structure. The three factors can be given the usual interpretation of level, steepness, and curvature.
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Bibliographic InfoArticle provided by American Statistical Association in its journal Journal of Business and Economic Statistics.
Volume (Year): 18 (2000)
Issue (Month): 3 (July)
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Web page: http://www.amstat.org/publications/jbes/index.cfm?fuseaction=main
Other versions of this item:
- de Jong, Frank, 1999. "Time-series and Cross-section Information in Affine Term Structure Models," CEPR Discussion Papers 2065, C.E.P.R. Discussion Papers.
- C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
- E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
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