The Term Structure of Interest Rates under Regime Shifts and Jumps

Shu Wu and Yong Zeng
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Shu Wu: Department of Economics, The University of Kansas

No 200520, WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS from University of Kansas, Department of Economics

Abstract: This paper develops a tractable dynamic term structure models under jump-diffusion and regime shifts with time varying transition probabilities. The model allows for regime-dependent jumps while both jump risk and regime-switching risk are priced. Closed form solution for the term structure is obtained for an ane-type model under loglinear approximation.

Keywords: Term Structure; Regime Switching; Jump Diffusion; Marked Point Process (search for similar items in EconPapers)
JEL-codes: G12 E43 E52 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-fin, nep-mac and nep-mon
Date: 2005-10, Revised 2005-10
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Persistent link: http://EconPapers.repec.org/RePEc:kan:wpaper:200520

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