IDEAS home Printed from
   My bibliography  Save this article

The Dynamics of the Forward Interest Rate Curve: A Formulation with State Variables


  • de Jong, Frank
  • Santa-Clara, Pedro


The objective of this paper is twofold. First, the paper develops a class of models of the term structure of interest rates, in the Heath, Jarrow, and Morton (1992) framework, with dynamics characterized by the evolution of a small set of state variables. Second, the paper exploits this characterization of the dynamics of the term structure in an estimation exercise that makes use of both the time series and cross-section of bond prices. In this way, our class of models bridges the gap between traditional models, such as Cox, Ingersoll, and Ross (1985) and Vasicek (1977), that emphasize the dynamics of interest rates and the models of Heath, Jarrow, and Morton (1992) that stress fitting the cross-section of bond prices.

Suggested Citation

  • de Jong, Frank & Santa-Clara, Pedro, 1999. "The Dynamics of the Forward Interest Rate Curve: A Formulation with State Variables," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 34(01), pages 131-157, March.
  • Handle: RePEc:cup:jfinqa:v:34:y:1999:i:01:p:131-157_00

    Download full text from publisher

    File URL:
    File Function: link to article abstract page
    Download Restriction: no

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cup:jfinqa:v:34:y:1999:i:01:p:131-157_00. 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: (Keith Waters). General contact details of provider: .

    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.

    We have no references for this item. You can help adding them by using 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.