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@article{ Lemke2008,
 title = {Bond Pricing when the Short-Term Interest Rate Follows a Threshold Process},
 author = {Lemke, Wolfgang and Archontakis, Theofanis},
 journal = {Quantitative Finance},
 number = {8},
 pages = {811-822},
 volume = {8},
 year = {2008},
 doi = {https://doi.org/10.1080/14697680701691451},
 urn = {https://nbn-resolving.org/urn:nbn:de:0168-ssoar-221143},
 abstract = {This paper derives analytical solutions for arbitrage-free bond yields when the short-term interest rate follows an autoregressive process  with the intercept switching endogenously. This process from the SETAR family is especially suited to capture the near-unit-root behavior typically observed in the evolution of short-term interest rates. The derived yield functions, mapping the one-month rate into n-period yields, exhibit a convex/concave shape to the left and the right of
the threshold value, respectively; a pattern which is also found in US bond yield data. The longer the time to maturity, the more distinct the nonlinearity of the yield function becomes.},
}