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A Theory Of The Term Structure Of Interest Rates

In: Theory Of Valuation

Author

Listed:
  • JOHN C. COX
  • JONATHAN E. INGERSOLL JR.
  • STEPHEN A. ROSS

Abstract

This paper uses an intertemporal general equilibrium asset pricing model to study the term structure of interest rates. In this model, anticipations, risk aversion, investment alternatives, and preferences about the timing of consumption all play a role in determining bond prices. Many of the factors traditionally mentioned as influencing the term structure are thus included in a way which is fully consistent with maximizing behavior and rational expectations. The model leads to specific formulas for bond prices which are well suited for empirical testing.

Suggested Citation

  • John C. Cox & Jonathan E. Ingersoll Jr. & Stephen A. Ross, 2005. "A Theory Of The Term Structure Of Interest Rates," World Scientific Book Chapters, in: Sudipto Bhattacharya & George M Constantinides (ed.), Theory Of Valuation, chapter 5, pages 129-164, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789812701022_0005
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    Keywords

    Asset Pricing; Financial Theory; Valuation; Term Structure; Interest Rates; Options; Portfolios; Taxes; Transaction Costs;
    All these keywords.

    JEL classification:

    • G00 - Financial Economics - - General - - - General

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