A theory of the term structure of interest rates. (English) Zbl 1274.91447

Cox, John C.; Ingersoll, Jonathan E. jun.; Ross, Stephen A.

Econometrica 53, 385-407 (1985).

Summary: 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.
See also the authors’ paper [ibid. 53, 363–384 (1985; Zbl 0576.90006)].

MSC:

91G30	Interest rates, asset pricing, etc. (stochastic models)
91B50	General equilibrium theory

Keywords:

interest rates; asset pricing model; CIR model

Citations:

Zbl 0576.90006