Long Memory Affine Term Structure Models

@inproceedings{Golinski2016LongMA,
  title={Long Memory Affine Term Structure Models},
  author={Adam Golinski and Paolo Zaffaroni},
  year={2016}
}
We develop a Gaussian discrete time essentially affine term structure model with long memory state variables. This feature reconciles the strong persistence observed in nominal yields and inflation with the theoretical implications of affine models, especially for long maturities. We characterise in closed-form the dynamic and cross-sectional implications of long memory for our model. We explain how long memory can naturally arise within the term structure of interest rates, providing a… CONTINUE READING
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