Design and Estimation of Quadratic Term Structure Models

Markus Leippold (markus.leippold@bf.uzh.ch) and Liuren Wu

Finance from University Library of Munich, Germany

Abstract: We consider the design and estimation of quadratic term structure models. We start with a list of stylized facts on interest rates and interest rate derivatives, classified into three layers: (1) general statistical properties, (2) forecasting relations, and (3) conditional dynamics. We then investigate the implications of each layer of property on model design and strive to establish a mapping between evidence and model structures. We calibrate a two­factor model that approximates these three layers of properties well, and illustrate how the model can be applied to pricing interest rate derivatives.

Keywords: quadratic model; term structure; positive interest rates; humps; expectation hy­pothesis; GMM; caps and floors. (search for similar items in EconPapers)
JEL-codes: E43 G12 G13 (search for similar items in EconPapers)
Pages: 49 pages
Date: 2002-08-30
Note: Type of Document - pdf; prepared on MikTex; to print on postscript; pages: 49 ; figures: included. produced via dvipdfm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

Downloads: (external link)
https://econwpa.ub.uni-muenchen.de/econ-wp/fin/papers/0207/0207014.pdf (application/pdf)

Related works:
Journal Article: Design and Estimation of Quadratic Term Structure Models (2003)
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:wpa:wuwpfi:0207014

Access Statistics for this paper

More papers in Finance from University Library of Munich, Germany
Bibliographic data for series maintained by EconWPA (volker.schallehn@ub.uni-muenchen.de this e-mail address is bad, please contact repec@repec.org).