Term structure estimation without using latent factors

@inproceedings{Duffee2004TermSE,
  title={Term structure estimation without using latent factors},
  author={Gregory R. Duffee},
  year={2004}
}
  • Gregory R. Duffee
  • Published 2004
The term structure is modeled as a function of observable and unobservable (latent) factors. I describe how to estimate the relation between the observed factors and the term structure without specifying or estimating latent-factor dynamics. No-arbitrage requirements are imposed in the estimation procedure. I apply the methodology to the joint dynamics of inflation and the term structure. As other research has noted, both short-term and long-term bond yields adjust gradually to a change in… CONTINUE READING
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