Long-Term Interest Rates and Consol Bond Valuation

Michael Dempster, Elena Medova and Michael Villaverde

Chapter 4 in Asset and Liability Management Handbook, 2011, pp 79-109 from Palgrave Macmillan

Abstract: Abstract The literature in the area of interest rate modelling is extensive. Traditional term structure models, such as Vasicek (1977) and Cox et al (1985) specify the short rate process. As short-term and long-term rates are not perfectly correlated, the data are clearly inconsistent with the use of one-factor time-homogeneous models. Chan et al (1992) demonstrate the empirical difficulties of one-factor continuous-time specifications within the Vasicek and Cox-Ingersoll-Ross (CIR) class of models using the generalized methods of moments.

Keywords: Interest Rate; Kalman Filter; Credit Risk; Term Structure; Yield Curve (search for similar items in EconPapers)
Date: 2011
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-0-230-30723-0_4

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DOI: 10.1057/9780230307230_4

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