Affine Term-Structure Models: Theory and Implementation
AbstractAffine models describe the stylized time-series properties of the term structure of interest rates in a reasonable manner, they generalize relatively easily to higher dimensions, and a vast academic literature exists relating to their implementation. This combination of characteristics makes the affine class a natural introductory point for modelling interest rate dynamics. The author summarizes and synthesizes the theoretical and practical specifics relating to this analytically attractive class of models. This summary is accomplished in a self-contained manner with sufficient detail so that relatively few technical points will be left for the reader to ponder. As such, this paper represents a first step towards advancing the Bank of Canada's research agenda in this area, with a view to using these models to assist with practical debt and risk-management problems currently under study.
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Bibliographic InfoPaper provided by Bank of Canada in its series Working Papers with number 01-15.
Length: 68 pages
Date of creation: 2001
Date of revision:
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Interest rates; Econometric and statistical methods; Debt management;
Find related papers by JEL classification:
- C0 - Mathematical and Quantitative Methods - - General
- C5 - Mathematical and Quantitative Methods - - Econometric Modeling
- G0 - Financial Economics - - General
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