We test whether the Nelson and Siegel (1987) yield curve model is arbitrage-free in a statistical sense. Theoretically, the Nelson-Siegel model does not ensure the absence of arbitrage opportunities, as shown by Bjork and Christensen (1999). Still, central banks and public wealth managers rely...

We test whether the Nelson and Siegel (1987) yield curve model is arbitrage-free in a statistical sense. Theoretically, the Nelson-Siegel model does not ensure the absence of arbitrage opportunities, as shown by Bjork and Christensen (1999). Still, central banks and public wealth managers rely...

This paper introduces a no-arbitrage framework to assess how macroeconomic factors help explain the risk-premium agents require to bear the risk of fluctuations in stock market volatil- ity. We develop a model in which return volatility and volatility risk-premia are stochastic and derive...