A plausible model of yield curve dynamics |
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Authors: | Gideon Magnus |
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Affiliation: | 1.Morningstar, Inc.,Chicago,USA |
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Abstract: | We present a simple model of yield curve dynamics which satisfies key criteria of plausibility. Specifically, yields are non-negative and the Sharpe ratio of a mean-variance optimal bond portfolio has a reasonable magnitude. The model matches stylized data features, in particular long-run moments of yields and excess returns. |
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