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Theory of long-term interest rates

Sebastian Rey

International Journal of Financial Engineering (IJFE), 2016, vol. 03, issue 03, 1-18

Abstract: This paper develops a general framework for deriving an arbitrage-free interest rates term structure related to long maturities that are not observed (traded) in the market. The original contribution is that the obtained long-term curve depends on variables that can be observed in the market or can be derived from it, avoiding the necessity of establishing arbitrary assumptions related to the ultimate long-term rate and how the convergence takes place.

Keywords: Term structure of interest rates; Dybvig; Ingersoll and Ross theorem; long-term interest rates convergence; interest rate risk; assets and liabilities management (search for similar items in EconPapers)
Date: 2016
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DOI: 10.1142/S2424786316500134

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International Journal of Financial Engineering (IJFE) is currently edited by George Yuan

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