Can affine models match the moments in bond yields?

Feldhütter, P (2015) Can affine models match the moments in bond yields? Quarterly Journal of Finance, 6 (2). ISSN 2010-1392

Abstract

This paper examines the ability of three-factor affine term structure models with essentially, extended, and semi-affine risk premium specifications to capture the dynamics of bond excess returns, yield volatility and higher order moments in yields. Extended affine models can best capture the time-variation in excess returns and yield volatility simultaneous. However, none of the three-factor models can fully match bond return predictability and yield volatility jointly. Extended affine models are more restricted in the ability to price bonds because of necessary parameter restrictions — the so-called Feller condition — and essentially affine and semi-affine models are therefore better suited for pricing purposes.

More Details

Item Type: Article
Subject Areas: Finance
Additional Information:

© 2016 World Scientific Publishing Co Pte Ltd

Date Deposited: 17 Nov 2016 13:15
Subjects: Financial risk
Risk
Last Modified: 20 May 2024 00:44
URI: https://lbsresearch.london.edu/id/eprint/606
More

Export and Share


Download

Full text not available from this repository.

Statistics

Altmetrics
View details on Dimensions' website

Downloads from LBS Research Online

View details

Actions (login required)

Edit Item Edit Item