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Dynamically Consistent Analysis of Realized Covariations in Term Structure Models

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  • Dennis Schroers
Abstract
In this article we show how to analyze the covariation of bond prices nonparametrically and robustly, staying consistent with a general no-arbitrage setting. This is, in particular, motivated by the problem of identifying the number of statistically relevant factors in the bond market under minimal conditions. We apply this method in an empirical study which suggests that a high number of factors is needed to describe the term structure evolution and that the term structure of volatility varies over time.

Suggested Citation

  • Dennis Schroers, 2024. "Dynamically Consistent Analysis of Realized Covariations in Term Structure Models," Papers 2406.19412, arXiv.org.
    • Handle: RePEc:arx:papers:2406.19412
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    File URL: http://arxiv.org/pdf/2406.19412
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    References listed on IDEAS

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    Cited by:

    1. Sven Karbach, 2024. "Heat modulated affine stochastic volatility models for forward curve dynamics," Papers 2409.13070, arXiv.org.

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