Template-type: ReDIF-Paper 1.0
Author-Name: Manuel Moreno
Author-Workplace-Name: Department of Economic Analysis and Finance, University of Castilla-La Mancha, Toledo, Spain.
Author-Name: Alfonso Novales
Author-Workplace-Name: Instituto Complutense de Análisis Económico (ICAE), and Department of Economic Analysis, Facultad de Ciencias Económicas y Empresariales, Universidad 
	Complutense, 28223 Madrid, Spain.
Author-Name: Federico Platania
Author-Workplace-Name: Léonard de Vinci Pôle Universitaire, Paris La Défense, France.
Title: A term structure model under cyclical fluctuations in interest rates
Abstract: We propose a flexible yet tractable model of the term structure of interest rates (TSIR). Term structure models attempt to explain how interest rates depend on 
	their maturities at a given point in time, characterizing the rela- tionship between short-term and long-term rates. Our model can reproduce and fit a variety of 
	TSIR shapes by capturing cyclical fluctuations of interest rates, different monetary policy reactions as witnessed pre- and post-crisis as well as the effect of the 
	business cycle or exogenous shocks. Our modelling approach also provides a characterization of long-term fluctuations in the mean level of interest rates unveiling 
	the effects of monetary policy in- terventions in interest rates. Furthermore, using daily US data, we compare the empirical ability of our model to both fit and 
	forecast the TSIR under different economic scenarios. We show that our model improves pricing and risk management by fitting and predicting interest rates more 
	accurately and precisely than do existing TSIR models.
Classification-JEL: D53, E43, G13, C58, E32, C31.
Keywords: Term structure of interest rates; cyclical fluctuations; bond pricing; TSIR fitting performance, interest rates forecast.
Length: 33 pages 
Creation-Date: 2019-09
Number: 2019-31
X-File-Ref: http://america.sim.ucm.es/repec/ucm/ref/doicae1931.txt
File-URL: https://eprints.ucm.es/id/eprint/57381/1/1931.pdf
File-Format: Application/pdf
Handle: RePEc:ucm:doicae:1931