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Dynamically Consistent Analysis of Realized Covariations in Term Structure Models

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  • Dennis Schroers

Abstract

In this article, we show how to analyze the covariation of bond prices nonparametrically and robustly, staying consistent with a general no‐arbitrage setting. This is, in particular, motivated by the problem of identifying the number of statistically relevant factors in the bond market under minimal conditions. We apply our method in an empirical study, which suggests that a high number of factors is needed to describe the term structure evolution and that the term structure of volatility varies over time.

Suggested Citation

  • Dennis Schroers, 2026. "Dynamically Consistent Analysis of Realized Covariations in Term Structure Models," Mathematical Finance, Wiley Blackwell, vol. 36(1), pages 203-236, January.
    • Handle: RePEc:bla:mathfi:v:36:y:2026:i:1:p:203-236
    DOI: 10.1111/mafi.70011
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