A Theory for the Term Structure of Interest Rates
AbstractThe Convolution and Master equations governing the time behavior of the term structure of Interest Rates are set up both for continuous variables and for their discretised forms. The notion of Seed is introduced. The discretised theoretical distributions matching the empirical data from the Federal Reserve System (FRS) are deduced from a discretised seed which enjoys remarkable scaling laws. In particular the tails of the distributions are very well reproduced. These results may be used to develop new methods for the computation of the value-at-risk and fixed-income derivative pricing.
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Bibliographic InfoPaper provided by EconWPA in its series Finance with number 0405029.
Length: 33 pages
Date of creation: 24 May 2004
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Note: Type of Document - zip; pages: 33. A latex version can be obtained on http://babbage.sissa.it/cond-mat/0405293
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Interest rates; Scaling laws; Term structure;
Find related papers by JEL classification:
- C00 - Mathematical and Quantitative Methods - - General - - - General
- C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
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