Discrete time Wishart term structure models

Christian Gourieroux and Razvan Sufana

Journal of Economic Dynamics and Control, 2011, vol. 35, issue 6, 815-824

Abstract: This paper reveals that the class of Affine Term Structure Models (ATSMs) introduced by Duffie and Kan (1996) is larger than previously considered in the literature. In the framework of risk factors following a Wishart autoregressive process, we define the Wishart Term Structure Model (WTSM) as an extension of a subclass of Quadratic Term Structure Models (QTSMs), derive simple parameter restrictions that ensure positive bond yields at all maturities, and observe that the usual constraint on affine processes requiring that the volatility matrix be diagonal up to a path independent linear invertible transformation can be considerably relaxed.

Keywords: Affine; term; structure; Quadratic; term; structure; CAR; process; Affine; process; Wishart; process (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:35:y:2011:i:6:p:815-824

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