The SR Approach: a new Estimation Method for Non-Linear and Non-Gaussian Dynamic Term Structure Models

Martin Andreasen and Bent Jesper Christensen

CREATES Research Papers from Department of Economics and Business Economics, Aarhus University

Abstract: This paper suggests a new and easy approach to estimate linear and non-linear dynamic term structure models with latent factors. We impose no distributional assumptions on the factors and they may therefore be non-Gaussian. The novelty of our approach is to use many observables (yields or bonds prices) in the cross-section dimension. An important benefit of using many observables in each time period is that the latent factors can be estimated quite accurately using standard regressions, and that parameters can be estimated by standard moment matching methods.

Keywords: Bond data; GMM; Non-linear filtering; Non-linear least squares; Missing observations; SMM (search for similar items in EconPapers)
JEL-codes: C10 C30 (search for similar items in EconPapers)
Pages: 62
References: View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://repec.econ.au.dk/repec/creates/rp/10/rp10_12.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aah:create:2010-12

Access Statistics for this paper

More papers in CREATES Research Papers from Department of Economics and Business Economics, Aarhus University
Bibliographic data for series maintained by ().