Models for pricing interest rate claims, developed under the Heath-Jarrow-Morton paradigm, differ according to the volatility structure imposed on forward rates. For most general HJM structures the resultant path dependence creates implementation problems. Ritchken and Sankarasubramanian have...

This paper tests and compares five distinct methods for estimating the term structure. The Unsmoothed Fama-Bliss method is an iterative method by which the discount rate function is built up by computing the forward rate necessary to price successively longer maturity bonds. The Smoothed...

Recent studies have documented the existence of a "predictability smile" in the term structure of interest rates: spreads between long maturity rates and short rates predict subsequent movements in interest rates provided the long horizon is three months or less or if the long horizon is two...

Markov-switching DSGE (MSDSGE) modeling has become a growing body of literature on economic and policy issues related to structural shifts. This paper develops a general perturbation methodology for constructing high-order approximations to the solutions of MSDSGE models. Our new method, called...

This paper presents tractable and efficient numerical solutions to general equilibrium models of asset prices and consumption where the representative agent has recursive preferences. It provides a discrete-time presentation of the approach of Fisher and Gilles (1999), treating continuous-time...

This paper develops a discrete-time two-factor model of interest rates with analytical solutions for bonds and many interest rate derivatives when the volatility of the short rate follows a GARCH process that can be correlated with the level of the short rate itself. Besides bond and bond...

The prices for callable U.S. Treasury securities provide the sole source of evidence concerning the implied volatility of interest rates over the extended 1926-1994 period. This paper uses the prices of callable as well as non-callable Treasury instruments to estimate implied interest rate...