Warning: oci_execute(): ORA-00936: falta una expresión in /var/www/html/includes/librerias/utilidadesBD.php on line 14

Warning: oci_fetch_array(): ORA-24374: definición no realizada antes de recuperar o de ejecutar y recuperar in /var/www/html/includes/librerias/utilidadesBD.php on line 37

Notice: Use of undefined constant AUTENTIFICACION - assumed 'AUTENTIFICACION' in /var/www/html/includes/librerias/utilidades.php on line 867

Notice: Use of undefined constant AUTENTIFICACION - assumed 'AUTENTIFICACION' in /var/www/html/includes/librerias/utilidades.php on line 941

Notice: Use of undefined constant AUTENTIFICACION - assumed 'AUTENTIFICACION' in /var/www/html/includes/librerias/utilidades.php on line 951

Notice: Use of undefined constant ACCESSO_INSTITUCIONES - assumed 'ACCESSO_INSTITUCIONES' in /var/www/html/includes/librerias/utilidades.php on line 966
Internationally affine term structure models

Internationally affine term structure models

Diez de los Rios, Antonio;
Next Document The Spanish Review of Financial Economics. 2011;09:31-4

Abstract

This note provides the conditions needed to obtain a multi-country term structure model where both bond yields for each country and the expected rate of depreciation (over any arbitrary period of time) are known affine functions of the set of state variables. In addition, two main families of dynamic term structure models are shown to satisfy these conditions.

Keywords: Term structure. Interest rates. Exchange rates.

Full Text


Notice: Use of undefined constant AUTENTIFICACION - assumed 'AUTENTIFICACION' in /var/www/html/includes/librerias/utilidades.php on line 867

Notice: Use of undefined constant AUTENTIFICACION - assumed 'AUTENTIFICACION' in /var/www/html/includes/librerias/utilidades.php on line 941

Notice: Use of undefined constant AUTENTIFICACION - assumed 'AUTENTIFICACION' in /var/www/html/includes/librerias/utilidades.php on line 951

Notice: Use of undefined constant ACCESSO_INSTITUCIONES - assumed 'ACCESSO_INSTITUCIONES' in /var/www/html/includes/librerias/utilidades.php on line 966
1. Introduction

The affine term structure model (ATSM), originally proposed by (Duffie and Kan, 1996), is widely regarded as the cornerstone of modern fixed income theory thanks to its main advantage: tractability. In particular, an ATSM provides analytical expressions for bond yields that are affine functions of some state vector. As noted by (Piazzesi, 2009), tractability is important because otherwise one would need to compute yields with Monte Carlo methods or solution methods for partial differential equations, which could be especially costly from a computational point of view when model parameters are estimated using data on bond yields.

This note presents a set of conditions that extends the tractability of the single-country ATSM to the multi-country case in the context of international term structure models as those in (Backus et al., 2001), (Brandt and Santa-Clara, 2002) and (Brennan and Xia, 2006) among others. In particular, this note focuses on internationally affine term structure models where not only bond yields in each one of the countries are known affine functions of a set of state variables, but also the expected rate of depreciation satisfies this property. The main contribution of the present paper is to provide conditions to obtain an expected rate of depreciation (over any arbitrary period of time) that is affine on the set of state variables (Section 2).

Two main families of ATSMs are shown to satisfy these conditions (Section 3). The first subgroup is the so-called completely affine term structure model introduced in (Dai and Singleton, 2000). However, such a specification has been found empirically restrictive. We overcome this issue by showing that the more flexible class of quadratic-Gaussian term structure models introduced in (Ahn et al., 2002) and (Leippold and Wu, 2003) can also deliver an affine expected rate of depreciation when interpreted as being affine in the original set of...


Notice: Use of undefined constant AUTENTIFICACION - assumed 'AUTENTIFICACION' in /var/www/html/includes/librerias/utilidades.php on line 867

Notice: Use of undefined constant AUTENTIFICACION - assumed 'AUTENTIFICACION' in /var/www/html/includes/librerias/utilidades.php on line 941

Notice: Use of undefined constant AUTENTIFICACION - assumed 'AUTENTIFICACION' in /var/www/html/includes/librerias/utilidades.php on line 951

Notice: Use of undefined constant ACCESSO_INSTITUCIONES - assumed 'ACCESSO_INSTITUCIONES' in /var/www/html/includes/librerias/utilidades.php on line 966

Notice: Use of undefined constant AUTENTIFICACION - assumed 'AUTENTIFICACION' in /var/www/html/includes/librerias/utilidades.php on line 867

Notice: Use of undefined constant AUTENTIFICACION - assumed 'AUTENTIFICACION' in /var/www/html/includes/librerias/utilidades.php on line 941

Notice: Use of undefined constant AUTENTIFICACION - assumed 'AUTENTIFICACION' in /var/www/html/includes/librerias/utilidades.php on line 951

Notice: Use of undefined constant ACCESSO_INSTITUCIONES - assumed 'ACCESSO_INSTITUCIONES' in /var/www/html/includes/librerias/utilidades.php on line 966

Read the complete contents of this article

Already registered?

 

Subscribe to the Journal

Access all articles in the magazine Portuguese Journal of Public Health, without limitation.

Antonio Diez de los Rios a,

a Bank of Canada, Ottawa, Canada
Journal: Internationally affine term structure models

This article belongs to the Journal: