The Empirical Implications of the Cox, Ingersoll, Ross Theory of the Term Structure of Interest Rates

Authors

  • STEPHEN J. BROWN,

  • PHILIP H. DYBVIG

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    • Both authors are from Yale University. We wish to acknowledge the helpful comments of Jon Ingersoll, Terry Marsh, Steve Ross and workshop participants at Princeton University. All errors are our own.


ABSTRACT

The one-factor version of the Cox, Ingersoll, and Ross model of the term structure is estimated using monthly quotes on U.S. Treasury issues trading from 1952 through 1983. Using data from a single yield curve, it is possible to estimate implied short and long term zero coupon rates and the implied variance of changes in short rates. Analysis of residuals points to a probable neglected tax effect.

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