We propose an arbitrage-free shadow-rate term structure model to analyze the euro-area yield curve from 1999 to mid-2015, when bond yields turned negative at various maturities. In the model the 'shadow rate' can reach any positive or negative level, while the actual one-month rate cannot fall...

Expectations about macroeconomic developments are important determinants of long term interest rates. In this paper, I compare two different assumptions on how agents may form their expectations about the economy and yields in a pseudo real time exercise. Based on the no-arbitrage...

Bond excess returns can be predicted by macro factors, however, large parts remain still unexplained. We apply a novel term structure model to decompose bond excess returns into expected excess returns (risk premia) and the unexpected part. In order to explore these risk premia and innovations,...

This paper develops high-frequency econometric methods to test for jumps in the spread of bond yields. We derive a coherent inference procedure that detects a jump in the yield spread only if at least one of the two underlying bonds displays a jump. We formalize the test as a sequential...

The decomposition of bond yields into term premiums and average expected future short rates is impaired by the limited availability of information about the dynamics of the expectations component. Therefore, many studies require the model-implied average expected future short rates to be close...

Using arbitrage-free affine models, we analyze the dynamics of German bond yields and risk premia for the period 1999 to 2010 (EMU). We estimate two model specifications, one with only latent factors, and another one with a Taylor-type rule comprising a price and a real activity factor drawn...

I propose a new term structure model for euro area real and nominal interest rates which explicitly incorporates a time-varying lower bound for nominal interest rates. Results suggest that the lower bound is of importance in structural analyses implying time-varying impulse responses of yield...

The evolution of the yields of different maturities is related and can be described by a reduced number of commom latent factors. Multifactor interest rate models of the finance literature, common factor models of the time series literature and others use this property. Each model has advantages...

The objective of our work is to study the term structure of interest rates and the sovereign credit spreads of emerging markets. We develop a model from term structure, credit risk and vector autoregressive models, based on the articles by Ang and Piazzesi (2003) and Ang, Dong and Piazzesi...