Can interest rate volatility be extracted from the cross section of bond yields?

• 成果类型: Article
• 署名作者: Collin-Dufresne, Pierre; Goldstein, Robert S.; Jones, Christopher S.
• 署名单位: University of Southern California; Columbia University; National Bureau of Economic Research; University of Minnesota System; University of Minnesota Twin Cities
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2008.06.007
• 发表日期: 2009
• 页码: 47-66
• 关键词: term structure of interest rates; affine models; stochastic volatility

摘要

Most affine models of the term structure with stochastic volatility predict that the variance of the short rate should play a 'dual role' in that it should also equal a linear combination of yields. However, we find that estimation of a standard affine three-factor model results in a variance state variable that, while instrumental in explaining the shape of the yield curve, is essentially unrelated to GARCH estimates of the quadratic variation of the spot rate process or to implied variances from options. We then investigate four-factor affine models. Of the models tested, only the model that exhibits 'unspanned stochastic volatility' (USV) generates both realistic short rate volatility estimates and a good cross-sectional fit. Our findings suggest that short rate volatility cannot be extracted from the cross-section of bond prices. In particular, short rate volatility and convexity are only weakly correlated. (C) 2009 Elsevier B.V. All rights reserved.