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A plausible model of yield curve dynamics

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  • Gideon Magnus

    (Morningstar, Inc.)

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.

Suggested Citation

  • Gideon Magnus, 2016. "A plausible model of yield curve dynamics," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 30(2), pages 205-228, May.
    • Handle: RePEc:kap:fmktpm:v:30:y:2016:i:2:d:10.1007_s11408-016-0265-9
    DOI: 10.1007/s11408-016-0265-9
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    References listed on IDEAS

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    More about this item

    Keywords

    Term structure modeling; Sharpe ratios;

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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