Linear-Rational Term Structure Models

• 成果类型: Article
• 署名作者: Filipovic, Damir; Larsson, Martin; Trolle, Anders B.
• 署名单位: Swiss Federal Institutes of Technology Domain; Ecole Polytechnique Federale de Lausanne; Swiss Finance Institute (SFI); Swiss Federal Institutes of Technology Domain; ETH Zurich
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/jofi.12488
• 发表日期: 2017
• 页码: 655-704
• 关键词: UNSPANNED STOCHASTIC VOLATILITY; INTEREST-RATE DERIVATIVES; VARYING RISK PREMIA; interest-rates; affine models; MARKET PRICE; BONDS SPAN; yields; DIFFUSIONS; options

摘要

We introduce the class of linear-rational term structure models in which the state price density is modeled such that bond prices become linear-rational functions of the factors. This class is highly tractable with several distinct advantages: (i) ensures non-negative interest rates, (ii) easily accommodates unspanned factors affecting volatility and risk premiums, and (iii) admits semi-analytical solutions to swaptions. A parsimonious model specification within the linear-rational class has a very good fit to both interest rate swaps and swaptions since 1997 and captures many features of term structure, volatility, and risk premium dynamics-including when interest rates are close to the zero lower bound.