Corrections and additions to ‘a nonlinear equilibrium model of the term structure of interest rates’

1992 ◽  
Vol 32 (3) ◽  
pp. 345-353 ◽  
Author(s):  
David Beaglehole ◽  
Mark Tenney
Keyword(s):  
Interest Rates ◽  
Term Structure ◽  
Equilibrium Model ◽  
Nonlinear Equilibrium

scholarly journals A GENERAL EQUILIBRIUM MODEL OF THE TERM STRUCTURE OF INTEREST RATES UNDER REGIME-SWITCHING RISK

2005 ◽  
Vol 08 (07) ◽  
pp. 839-869 ◽  
Author(s):  
SHU WU ◽  
YONG ZENG
Keyword(s):  
General Equilibrium ◽  
Interest Rates ◽  
Term Structure ◽  
Risk Premium ◽  
Equilibrium Model ◽  
Regime Switching ◽  
Yield Curve ◽  
Closed Form Solution ◽  
Form Solution ◽  
General Equilibrium Model

This paper develops a general equilibrium model of the term structure of interest rates in the presence of the systematic risk of regime shifts. The model elucidates the economic nature of the regime-shift risk premium and introduces a new source of time-variation in bond returns. A closed-form solution for the term structure of interest rates is obtained under an affine model using log-linear approximation. The model is estimated by Efficient Method of Moments. The regime-switching risk is found to be statistically significant and mostly affect the long-end of the yield curve.

Abstract: A Theory of the Term Structure of Interest Rates and the Valuation of Interest-Dependent Claims

1977 ◽  
Vol 12 (4) ◽  
pp. 661-661 ◽  
Author(s):  
John C. Cox ◽  
Jonathan E. Ingersoll ◽  
Stephen A. Ross
Keyword(s):  
Asset Pricing ◽  
Interest Rates ◽  
Term Structure ◽  
Equilibrium Model ◽  
Risk Attitudes ◽  
Financial Assets ◽  
Risk Averse ◽  
Rates Of Return ◽  
Investment Opportunities ◽  
Intertemporal Asset Pricing

The main focus of this study concerns the pricing of default-free bonds in a risky economy inhabited by risk-averse consumers. The methodology of the paper draws upon recent work in the fields of intertemporal asset pricing and valuation by arbitrage principles. We develop a general equilibrium model for the expected rates of return on “created financial assets” (such as bonds) dependent upon the risk attitudes of investors and the uncertain real investment opportunities available.

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