Notes on the yield curve

Ian Martin and Steve Ross

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: We study the properties of the yield curve under the assumptions that (i) the fixed-income market is complete and (ii) the state vector that drives interest rates follows a finite discrete-time Markov chain. We focus in particular on the relationship between the behavior of the long end of the yield curve and the recovered time discount factor and marginal utilities of a pseudo-representative agent; and on the relationship between the “trappedness” of an economy and the convergence of yields at the long end.

Keywords: yield curve; term structure; recovery theorem; traps; Cheeger inequality; eigenvalue gap (search for similar items in EconPapers)
JEL-codes: G12 (search for similar items in EconPapers)
Pages: 14 pages
Date: 2019-12-01
New Economics Papers: this item is included in nep-ore and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Published in Journal of Financial Economics, 1, December, 2019, 134(3), pp. 689 - 702. ISSN: 0304-405X

Downloads: (external link)
http://eprints.lse.ac.uk/90208/ Open access version. (application/pdf)

Related works:
Journal Article: Notes on the yield curve (2019)
Working Paper: Notes on the Yield Curve (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:90208

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