Optimal Estimation of Multi-Country Gaussian Dynamic Term Structure Models Using Linear Regressions

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This paper proposes a novel asymptotic least-squares estimator of multi-country Gaussian dynamic term structure models that is easy to compute and asymptotically efficient, even when the number of countries is relatively large—a situation in which other recently proposed approaches lose their tractability. We illustrate our estimator within the context of a seven-country, 10-factor term structure model.

DOI: https://doi.org/10.34989/swp-2017-33