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Theory of long-term interest rates

Author

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  • Sebastián A. Rey

    (Centro de Investigación en Métodos Cuantitativos Aplicados a la Economía y la Gestión, Facultad de Ciencias Económicas, Universidad de Buenos Aires, Av. Córdoba 2122 (C1120AAQ), Ciudad Autónoma de Buenos Aires, Argentina)

Abstract

This paper develops a general framework for deriving an arbitrage-free interest rates term structure related to long maturities that are not observed (traded) in the market. The original contribution is that the obtained long-term curve depends on variables that can be observed in the market or can be derived from it, avoiding the necessity of establishing arbitrary assumptions related to the ultimate long-term rate and how the convergence takes place.

Suggested Citation

  • Sebastián A. Rey, 2016. "Theory of long-term interest rates," International Journal of Financial Engineering (IJFE), World Scientific Publishing Co. Pte. Ltd., vol. 3(03), pages 1-18, September.
    • Handle: RePEc:wsi:ijfexx:v:03:y:2016:i:03:n:s2424786316500134
    DOI: 10.1142/S2424786316500134
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