Search Results
Showing results 1 to 2 of approximately 2.
(refine search)
Conference Paper
Regime shifts in a dynamic term structure model of U.S. Treasury bond yields
This paper develops and empirically implements an arbitrage-free, dynamic term structure model with "priced" factor and regime-shift risks. The risk factors are assumed to follow a discrete-time Gaussian process, and regime shifts are governed by a discrete-time Markov process with state-dependent transition probabilities. This model gives closed-form solutions for zero-coupon bond prices and an analytic representation of the likelihood function for bond yields. Using monthly data on U.S. Treasury zero-coupon bond yields, we document notable differences in the behaviours of the market ...