Department of Economics and Business Economics

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

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    Final published version, 520 KB, PDF document

  • School of Economics and Management
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.
Original languageEnglish
Place of publicationAarhus
PublisherInstitut for Økonomi, Aarhus Universitet
Number of pages62
Publication statusPublished - 2010

    Research areas

  • Bond data, GMM, Non-linear filtering, Non-linear least squares, Missing observations, SMM

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