A 2-FACTOR MODEL OF THE UK-YIELD-CURVE

Authors
STEELEY JM
Citation
Jm. Steeley, A 2-FACTOR MODEL OF THE UK-YIELD-CURVE, Manchester School of Economic and Social Studies, 65, 1997, pp. 32-58
Citations number
27
Categorie Soggetti
Economics
Journal title
Manchester School of Economic and Social Studies → ACNP
ISSN journal
00252034
Volume
65
Year of publication
1997
Supplement
S
Pages
32 - 58
Database
ISI
SICI code
0025-2034(1997)65:<32:A2MOTU>2.0.ZU;2-2
Abstract
I model the forward premium in the U.K. gilt-edged market over the per iod 1982-96 using a two-factor general equilibrium model of the term s tructure of interest rates. The model permits the decomposition of the forward premium into separate components representing interest rate e xpectations, the risk premia associated with each of the underlying fa ctors, and terms capturing the direct impact of the variances of the f actors on the shape of the forward curve.