The SR Approach: a new Estimation Method for Non-Linear and Non-Gaussian Dynamic Term Structure Models

Publikation: Working paperForskning

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  • Institut for Økonomi
This paper suggests a new and easy approach to estimate linear and non-linear dynamic term
structure models with latent factors. We impose no distributional assumptions on the factors and
they may therefore be non-Gaussian. The novelty of our approach is to use many observables (yields
or bonds prices) in the cross-section dimension. An important bene…t of using many observables
in each time period is that the latent factors can be estimated quite accurately using standard
regressions, and that parameters can be estimated by standard moment matching methods.
OriginalsprogEngelsk
UdgivelsesstedAarhus
UdgiverInstitut for Økonomi, Aarhus Universitet
Antal sider62
StatusUdgivet - 2010

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