Advanced Search
MyIDEAS: Login to save this paper or follow this series

Markov switching quadratic term structure models


Author Info

  • Stéphane Goutte

    (LPMA - Laboratoire de Probabilités et Modèles Aléatoires - CNRS : UMR7599 - Université Pierre et Marie Curie [UPMC] - Paris VI - Université Paris VII - Paris Diderot)

Registered author(s):


    In this paper, we consider a discrete time economy where we assume that the short term interest rate follows a quadratic term structure of a regime switching asset process. The possible non-linear structure and the fact that the interest rate can have different economic or financial trends justify the interest of Regime Switching Quadratic Term Structure Model (RS-QTSM). Indeed, this regime switching process depends on the values of a Markov chain with a time dependent transition probability matrix which can well captures the different states (regimes) of the economy. We prove that under this modelling that the conditional zero coupon bond price admits also a quadratic term structure. Moreover, the stochastic coefficients which appear in this decomposition satisfy an explicit system of coupled stochastic backward recursions.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL:
    Download Restriction: no

    Bibliographic Info

    Paper provided by HAL in its series Working Papers with number hal-00821745.

    as in new window
    Date of creation: 12 May 2013
    Date of revision:
    Handle: RePEc:hal:wpaper:hal-00821745

    Note: View the original document on HAL open archive server:
    Contact details of provider:
    Web page:

    Related research

    Keywords: Quadratic term structure model; Regime switching; Zero coupon bond; Markov chain.;

    This paper has been announced in the following NEP Reports:


    No references listed on IDEAS
    You can help add them by filling out this form.



    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.


    Access and download statistics


    When requesting a correction, please mention this item's handle: RePEc:hal:wpaper:hal-00821745. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (CCSD).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.