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research article

Identification of Maximal Affine Term Structure Models

Collin-Dufresne, Pierre  
•
Goldstein, Robert S.
•
Jones, Christopher S.
2008
The Journal of Finance

Building on Duffie and Kan (1996), we propose a new representation of affine models in which the state vector comprises infinitesimal maturity yields and their quadratic covariations. Because these variables possess unambiguous economic interpretations, they generate a representation that is globally identifiable. Further, this representation has more identifiable parameters than the "maximal" model of Dai and Singleton (2000). We implement this new representation for select three-factor models and find that model-independent estimates for the state vector can be estimated directly from yield curve data, which present advantages for the estimation and interpretation of multifactor models.

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Type
research article
DOI
10.1111/j.1540-6261.2008.01331.x
Author(s)
Collin-Dufresne, Pierre  
Goldstein, Robert S.
Jones, Christopher S.
Date Issued

2008

Published in
The Journal of Finance
Volume

63

Issue

2

Start page

743

End page

795

Subjects

INTEREST-RATES

•

RISK PREMIA

•

SWAP

•

VOLATILITY

•

MARKETS

•

OPTIONS

•

YIELDS

Editorial or Peer reviewed

REVIEWED

Written at

OTHER

EPFL units
SFI-PCD  
Available on Infoscience
August 7, 2013
Use this identifier to reference this record
https://infoscience.epfl.ch/handle/20.500.14299/93986
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