Phenomenology of the Interest Rate Curve

@article{Bouchaud1997PhenomenologyOT,
  title={Phenomenology of the Interest Rate Curve},
  author={Jean-Philippe Bouchaud and N. Sagna and Rama Cont and N. El-Karoui and Marc Potters},
  journal={Applied Mathematical Finance},
  year={1997},
  volume={6},
  pages={209-232}
}
This paper contains a phenomenological description of the whole U.S. forward rate curve (FRC), based on an data in the period 1990-1996. We find that the average FRC (measured from the spot rate) grows as the square-root of the maturity, with a prefactor which is comparable to the spot rate volatility. This suggests that forward rate market prices include a risk premium, comparable to the probable changes of the spot rate between now and maturity, which can be understood as a `Value-at-Risk… 

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