Explaining the Forward Interest Rate Term Structure
| dc.creator | Matacz, Andrew | |
| dc.creator | Bouchaud, Jean-Philippe | |
| dc.date | 1999-09-28 | |
| dc.date.accessioned | 2026-07-25T16:23:30Z | |
| dc.description | We present compelling empirical evidence for a new interpretation of the Forward Rate Curve (FRC) term structure. We find that the average FRC follows a square-root law, with a prefactor related to the spot volatility, suggesting a Value-at-Risk like pricing. We find a striking correlation between the instantaneous FRC and the past spot trend over a certain time horizon. This confirms the idea of an anticipated trend mechanism proposed earlier and provides a natural explanation for the observed shape of the FRC volatility. We find that the one-factor Gaussian Heath-Jarrow-Morton model calibrated to the empirical volatility function fails to adequately describe these features. | |
| dc.description | 12 pages, Latex + 4 EPS figures | |
| dc.identifier | https://arxiv.org/abs/cond-mat/9909396 | |
| dc.identifier | http://arxiv.org/abs/cond-mat/9909396 | |
| dc.identifier.uri | https://dspace.dare.co.zw/handle/123456789/40956 | |
| dc.subject | Condensed Matter | |
| dc.title | Explaining the Forward Interest Rate Term Structure | |
| dc.type | text |