Virtually all existing continuous-time, single-factor term structure models are based on a short rate process that has a linear drift function. However, there is no strong a priori argument in favor of linearity, and Stanton (1997) and Ait-Sahalia (1996) employ nonparametric estimation...

Aït-Sahalia (1996) and Stanton (1997) use nonparametric estimators applied to short-term interest rate data to conclude that the drift function contains important nonlinearities. We study the finite-sample properties of their estimators by applying them to simulated sample paths of a...

In the past 10 years, increasingly sophisticated statistical techniques have been applied to the estimation of increasingly complex models of the term structure of interest rates. In reviewing this literature, we highlight the facts that have been established and the key unresolved issues. The...

Virtually all existing continuous-time, single-factor term structure models are based on a short rate process that has a linear drift function. However, there is no strong a priori argument in favor of linearity, and Stanton (1997) and Ait-Sahalia (1996), employing nonparametric estimation...