Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/19634
Authors: 
Lemke, Wolfgang
Archontakis, Theofanis
Year of Publication: 
2006
Series/Report no.: 
Discussion paper Series 1 / Volkswirtschaftliches Forschungszentrum der Deutschen Bundesbank 2006,06
Abstract: 
Using a stochastic discount factor approach, we derive the exact solution for arbitrage-free bond yields for the case that the short-term interest rate follows a threshold process with the intercept switching endogenously. The yield functions, mapping the one-month rate into n-period yields, respectively. This is in contrast to linear short-rate process which imply an affine yield function. The intervals for which convexity or concavity prevails increase with time to maturity.
Subjects: 
Threshold process
term structure of interest rates
nonlinear yield function
JEL: 
C63
G12
E43
Document Type: 
Working Paper

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