Time Series and Cross-Section Information in Affine Term-Structure Models

Frank de Jong

Journal of Business & Economic Statistics, 2000, vol. 18, issue 3, 300-314

Abstract: In this article I provide an empirical analysis of the term structure of interest rates using the affine class of term-structure models introduced by Duffie and Kan. I estimate these models by combining time series and cross-section information in a theoretically consistent way. In the estimation I use a Kalman filter based on a discretization of the continuous-time factor process and allow for a general measurement-error structure. I provide evidence that a three-factor affine model with correlated factors is able to provide an adequate fit of the cross-section and the dynamics of the term structure. The three factors can be given the usual interpretation of level, steepness, and curvature.

Date: 2000
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Working Paper: Time-series and Cross-section Information in Affine Term Structure Models (1999)
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Persistent link: https://EconPapers.repec.org/RePEc:bes:jnlbes:v:18:y:2000:i:3:p:300-314

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