Recursive Nature of the Expectations Hypothesis

Felix Geiger

Chapter Appendix C in The Yield Curve and Financial Risk Premia, 2011, pp 277-278 from Springer

Abstract: Abstract The use of the pure form of the Expectations Hypothesis can give a simple example of a term structure model. Suppose that the short-term interest rates follows an AR(1) process with C.1 $$\begin{array}{rlrlrl} {i}_{1,t} = \mu + \phi {i}_{1,t-1} + {\epsilon }_{t} & & C.1 \end{array}$$ and εt ∼ N(0, σ2).

Date: 2011
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DOI: 10.1007/978-3-642-21575-9_11

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