It is well-known that interest rates are extremely persistent, yet they are best modeled and understood as stationary processes. These properties are contradictory in the workhorse Gaussian affine term structure model in which persistent data often result in unit roots that imply...

It is well-known that interest rates are extremely persistent, yet they are best modeled and understood as stationary processes. These properties are contradictory in the workhorse Gaussian affine term structure model in which persistent data often result in unit roots that imply...

It is well-known that interest rates are extremely persistent, yet they are best modeled and understood as stationary processes. These properties are contradictory in the workhorse Gaussian affine term structure model in which the persistent data often result in unit roots that imply...

This paper presents a term structure model for no-arbitrage bond yields and realized bond market volatility. Based on well-known results, realized yield curve covariation is linked to GARCH-type conditional covariation. The model is tractable and its latent state variables can be filtered using...

This paper characterizes time variation in the link between macroeconomic risk and variation in the yield curve. Based on a term structure model with time-varying variance decomposition, I show that the macroeconomic share of the variation in short-term yields has increased since the 1970s. A...

We propose a term structure model featuring double-autoregressive dynamics, which can accommodate unit roots and cointegrating relations while maintaining stationarity. In an empirical application, the model reduces in-sample misspecification and significantly improves out-of-sample yield...