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The Role of Jumps and Options in the Risk Premia of Interest Rates
Brazilian Review of Econometrics
<p>There is evidence that jumps double the explanatory power of Campbell and Shiller (1991) excess bond returns' regressions (Wright and Zhou, 2009), and options bring information about bond risk premia beyond that spanned by the yield curve (Joslin, 2007). In this paper I incorporate these features in a Gaussian Affine Term Structure Model (ATSM) in order to assess two questions: (1) what are the implications of incorporating jumps in an ATSM for option pricing, and (2) how jumps and optionsdoi:10.12660/bre.v38n22018.18997 fatcat:65wlkkds7bgq5mzup6botxldv4