Affine-Quadratic Term Structure Models - Toward the Understanding of Jumps in Interest Rate

摘要：

In this paper,we propose affine-quadratic term structure models that explicitly incorporate random jumps of stochastic intensity in the short rate process. The models allow us to empirically investigate the behavior of jumps in interest rates. We derive near closed-form bond pricing formula and implement the models using US term structure data. Our results show that incorporating stochastic jump intensity significantly improves the model fit to the term structure dynamics. The empirical results also suggest that jump intensity tends to be negatively correlated with interest rate changes,and the average size of negative jumps is larger than that of positive ones. Interestingly,at monthly frequency,while stochastic volatility has certain predictive power of inflation,jumps are neither triggered by nor predictive of changes in macroeconomic variables. At daily frequency,however,we document interesting patterns for jumps in association with various informational shocks.

作者: George J.Jiang Shu Yan

作者单位: Department,Eller College of Management,University of Arizona,Tucson,Arizona 85721-0108 Department,Moore School of Business,University of South Carolina,Columbia,South Carolina 29208

会议类型: 国际会议

会议名称: 2007年中国国际金融年会

会议地点: 成都

会议语种:英文

在线出版日期: 2007-07-09（万方平台首次上网日期，不代表论文的发表时间）