Informational Content in Interest Rate Term Structures

Robert O Edminster and Dilip B Madan

The Review of Economics and Statistics, 1993, vol. 75, issue 4, 695-99

Abstract: Employing continuous arbitrage pricing principles, closed-form expressions for the term structure of interest rates as functions of two specific rates are developed. Model restrictions to the two one-dimensional submodels are tested and rejected, thereby supporting the hypothesis that the term structure is at least two-dimensional. Evidence is also presented that supports the view that the informational content of the term structure lies in its longer maturities. Copyright 1993 by MIT Press.

Date: 1993
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