The Term Structure of Interest Rates under Regime Shifts and Jumps

Shu Wu and Yong Zeng

No 200520, WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS from University of Kansas, Department of Economics

Abstract: This paper develops a tractable dynamic term structure models under jump-diffusion and regime shifts with time varying transition probabilities. The model allows for regime-dependent jumps while both jump risk and regime-switching risk are priced. Closed form solution for the term structure is obtained for an affine-type model under loglinear approximation.

Keywords: Term Structure; Regime Switching; Jump Diffusion; Marked Point Process (search for similar items in EconPapers)
JEL-codes: E43 E52 G12 (search for similar items in EconPapers)
Pages: 10 pages
Date: 2005-10, Revised 2005-10
New Economics Papers: this item is included in nep-fin, nep-mac and nep-mon
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Journal Article: The term structure of interest rates under regime shifts and jumps (2006)
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