From bond yield to macroeconomic instability: A parsimonious affine model

摘要: Abstract We present a hybrid Heston model with common stochastic volatility to describe government bond yield dynamics. The is analytically tractable and, therefore, can be efficiently estimated using the maximum likelihood approach and specific expansion in order cope curse of dimensionality. Twofold contribution. First, it captures changes predict future values Germany, French, Italy Spain. result an early-warning indicator which anticipates phases instability characterizing time series investigated. Then, describes convergence/divergence phenomena among European yields explores countries’ reactions monetary policy described through EONIA interbank rate. also investigate potential this on U.S. data (treasury bills).