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<p>Based on an analysis of changes in the yields of German government bonds, we propose a simple model for the term structure of interest rates and show that this model with two parameters (relating to the interest level and slope of the term structure) fits empirically well the data for a change horizon of one year or longer, especially in the low-interest environment, and give examples for applications. In addition, we provide closed-form solutions for some interest bearing instruments and give a new interpretation for the convexity when this linear model for the term structure is used.</p>

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Modelling the term structure

  • 期刊论文

  • 出版模式：

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  • 发表日期：

    2025年6月28日

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  • Christoph Memmel,
  • Lotta Heckmann-Draisbach

摘要

Based on an analysis of changes in the yields of German government bonds, we propose a simple model for the term structure of interest rates and show that this model with two parameters (relating to the interest level and slope of the term structure) fits empirically well the data for a change horizon of one year or longer, especially in the low-interest environment, and give examples for applications. In addition, we provide closed-form solutions for some interest bearing instruments and give a new interpretation for the convexity when this linear model for the term structure is used.