Time-Varying Volatility and the Dynamic Behavior of the Term Structure

Robert Engle and Victor K. Ng

No 3682, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: In this paper, we consider a framework with which the cross sectional and time series behavior of the yield curve can be studied simultaneously. We examine the relationship between the yield curve and the time-varying conditional volatility of the Treasury bill market. We demonstrate that differently shaped yield curves can result given different combinations of volatility and expectations about future spot rates. Moreover, adjusting the forward rate for the volatility related liquidity premium can improve its performance as a predictor of future spot rates at least for the period from August 1964 to August 1979.

Date: 1991-04
Note: ME
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Published as Journal of Money, Credit and Banking, 1993, vol. 25, issue 3, pages 336-49.

Downloads: (external link)
http://www.nber.org/papers/w3682.pdf (application/pdf)

Related works:
Journal Article: Time-Varying Volatility and the Dynamic Behavior of the Term Structure (1993)
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:nbr:nberwo:3682

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w3682

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().