An Examination of Affine Term Structure Models

Cited 1 time in webofscience Cited 0 time in scopus
  • Hit : 326
  • Download : 0
This paper examines the relative performance of models in the affine term structure family which includes both complete and essential affine models using Korean government bond yield data. Principal component analysis with Korean government bond yield data shows that the first three components of yields explain 97% of the total yield curve variation, and the components can be characterized as "level", "slope", and "curvature." We also estimate all three-factor affine models using a Kalman filter/quasi maximum likelihood (QML) approach. An exhaustive comparison shows that the three-factor essential affine model, A(1) (3)E, in which only one factor affects the instantaneous volatility of short rates but all three factors affect the price of risk, appears to be the best model in Korea. This finding is consistent with results in Dai and Singleton (2002) and Duffee (2002) on US data and in Tang and Xia (2007) on Canadian, German, Japanese, UK and US data.
Publisher
KOREAN SECURITIES ASSOC
Issue Date
2009-08
Language
English
Article Type
Article
Keywords

INTEREST-RATES; DYNAMICS; PREMIA

Citation

ASIA-PACIFIC JOURNAL OF FINANCIAL STUDIES, v.38, pp.491 - 519

ISSN
2041-9945
DOI
10.1111/j.2041-6156.2009.tb00021.x
URI
http://hdl.handle.net/10203/98793
Appears in Collection
MT-Journal Papers(저널논문)
Files in This Item
There are no files associated with this item.
This item is cited by other documents in WoS
⊙ Detail Information in WoSⓡ Click to see webofscience_button
⊙ Cited 1 items in WoS Click to see citing articles in records_button

qr_code

  • mendeley

    citeulike


rss_1.0 rss_2.0 atom_1.0