Linear Factor Models and the Term Structure of Interest Rates

Emmanuelle Clément, Christian Gourieroux and Alain Monfort

Annals of Economics and Statistics, 1995, issue 40, 37-65

Abstract: The aim of this paper is the determination of the term structure of interest rates from observations of the prices of fixed-income bonds. We first introduce factor models to describe the evolution of prices of zero-coupon bonds, and we derive the constraints induced by the arbitrage free condition. The second part of the paper is concerned with the statistical problems: identification, parameter estimation, test of the arbitrage free hypothesis, valuation of various financial assets.

Date: 1995
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Persistent link: https://EconPapers.repec.org/RePEc:adr:anecst:y:1995:i:40:p:37-65

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