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Linear–quadratic term structure models for negative euro area yields

Marco Realdon and Wachira Boonyanet

Economics Letters, 2017, vol. 155, issue C, 149-153

Abstract: Four factor linear–quadratic models (LQTSM) fit negative Euro yields well, as short yields can be negative, but not the longest yields. LQTSM outperform four factor quadratic models that permit negative yields, which in turn outperform affine Gaussian models.

Keywords: Linear–quadratic term structure models; Quadratic models; Discrete time; Negative yields; Extended Kalman Filter (search for similar items in EconPapers)
JEL-codes: G12 G13 (search for similar items in EconPapers)
Date: 2017
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