The dynamic behaviour of the term structure of interest rates and its implication for interest-rate sensitive asset pricing
This thesis investigates the fundamental assumptions made in recent continuous-time equilibrium models of the term structure of interest rates. It finds that the number and the stochastic processes of state variables are strikingly different from those assumed in the literature. It develops a three-...
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| Format: | Others |
| Language: | en |
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McGill University
1993
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| Online Access: | http://digitool.Library.McGill.CA:80/R/?func=dbin-jump-full&object_id=41168 |
| Summary: | This thesis investigates the fundamental assumptions made in recent continuous-time equilibrium models of the term structure of interest rates. It finds that the number and the stochastic processes of state variables are strikingly different from those assumed in the literature. It develops a three-factor empirical term structure model, based on 22 years of cross-maturity time series data. The results show that the price differences, between the well-known Vasicek, and Cox, Ingersoll and Ross models and the three-factor empirical model, for interest-rate sensitive securities are of substantial economic significance. |
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