On the Dybvig-Ingersoll-Ross Theorem

Constantinos Kardaras and Eckhard Platen ()

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Abstract: The Dybvig-Ingersoll-Ross (DIR) theorem states that, in arbitrage-free term structure models, long-term yields and forward rates can never fall. We present a refined version of the DIR theorem, where we identify the reciprocal of the maturity date as the maximal order that long-term rates at earlier dates can dominate long-term rates at later dates. The viability assumption imposed on the market model is weaker than those appearing previously in the literature.

Date: 2009-01, Revised 2010-03
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Citations: View citations in EconPapers (9)

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