This is the program for the 2010 Joint Statistical Meetings in Vancouver, British Columbia.
Abstract Details
Activity Number:
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131
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Type:
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Contributed
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Date/Time:
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Monday, August 2, 2010 : 8:30 AM to 10:20 AM
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Sponsor:
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Business and Economic Statistics Section
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Abstract - #307496 |
Title:
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Arbitrage-Free Linear Price Function Models for the Term Structure of Interest Rates
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Author(s):
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Andrew F. Siegel*+
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Companies:
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University of Washington
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Address:
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Box 353200, Seattle, WA, 98195-3200,
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Keywords:
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Term Structure ;
Interest Rates ;
Yields ;
Bonds ;
Linear Price Model
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Abstract:
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The arbitrage-free term structure models introduced here are structurally less constrained than affine models, and the differential equation admits a closed-form solution in the general case. Compatible specification of conditional stochastic volatility and correlation for the state variables is very general because the constraint imposed by the no-arbitrage condition is satisfied entirely by the drift term of the stochastic differential equation, allowing essentially any mean-zero volatility specification. A specific submodel within this family is identified that produces yield curves that closely match the widely-used (but not arbitrage-free) parsimonious models introduced by Nelson and Siegel in 1987.
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Authors who are presenting talks have a * after their name.
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