BOND RETURNS,DISCRETE STOCHASTIC PROCESSES,AND DURATION |
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Authors: | Gerald O Bierwag |
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Abstract: | A particular duration measure may correspond to many different stochastic processes that generate fluctuations in the term structure of interest rates. There does not exist a one-to-one correspondence between the duration measure and an underlying stochastic process. In particular, durations derived from disequilibrium processes also correspond to equilibrium processes. Furthermore, it is shown that multi-factor discrete models of bond returns may also correspond to multi-duration models of bond returns. |
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