Long Forward and Zero-Coupon Rates Can Never Fall
Jonathan E. Ingersoll (),
Philip Dybvig and
Additional contact information
Jonathan E. Ingersoll: School of Management
Yale School of Management Working Papers from Yale School of Management
In frictionless markets having no arbitrage, the asymptotic zero-coupon rate never falls. The same is true of the long forward rate. The long par-coupon rate can rise and fall due to forward rate movements at short maturities. This paper relates the three types of interest rate and formalizes and proves the impossibility results for falling asymptotic rates. These results can be tested in a parametric term structure specification that is rich enough to identify a time series of long rates. The results show that it is not possible to specify arbitrarily the long forward or zero-coupon rate process.
JEL-codes: G24 (search for similar items in EconPapers)
References: Add references at CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
Journal Article: Long Forward and Zero-Coupon Rates Can Never Fall (1996)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:ysm:somwrk:ysm45
Access Statistics for this paper
More papers in Yale School of Management Working Papers from Yale School of Management Contact information at EDIRC.
Bibliographic data for series maintained by ().