This article is a critical survey of models designed for pricing fixed-income securities and their associated term structures of market yields. Our primary focus is on the interplay between the theoretical specification of dynamic term structure models and their empirical fit to historical...

This article develops and empirically implements an arbitrage-free, dynamic term structure model with 'priced' factor and regime-shift risks. The risk factors are assumed to follow a discrete-time Gaussian process, and regime shifts are governed by a discrete-time Markov process with...

In any canonical Gaussian dynamic term structure model (GDTSM), the conditional forecasts of the pricing factors are invariant to the imposition of no-arbitrage restrictions. This invariance is maintained even in the presence of a variety of restrictions on the factor structure of bond yields....

This article develops a rich class of discrete-time, nonlinear dynamic term structure models (DTSMs). Under the risk-neutral measure, the distribution of the state vector X_t resides within a family of discrete-time affine processes that nests the exact discrete-time counterparts of the entire...

In this article we provide econometric tools for the evaluation of intertemporal asset pricing models using specification-error and volatility bounds. We formulate analog estimators of these bounds, give conditions for consistency, and derive the limiting distribution of these estimators. The...

We study how decision-makers' concerns about robustness affect prices and quantities in a stochastic growth model. In the model economy, growth rates in technology are altered by infrequent large shocks and continuous small shocks. An investor observes movements in the technology level but...