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Fuzzy Differences in Differences

A large part of the term structure literature interprets one of the under-lying factors as a level factor. In this paper we consider a single factor modelinterpretable as a level factor model. We prove that this model is compat-ible with no-arbitrage restrictions and the positivity of rates under ratherunrealistic conditions on the dynamic of the short term interest rate. Thisintroduces some doubt on the relevance of the level interpretation of a factorin term structure models.
Year of publication:
2010
Authors: de Chaisemartin, Clément de CHAISEMARTIN
Institutions: Centre de Recherche en Économie et Statistique (CREST), Groupe des Écoles Nationales d'Économie et Statistique (GENES)
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application/pdf
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Type of publication: Book / Working Paper
Notes:
Number 2010-08
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Persistent link: https://www.econbiz.de/10008526730
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