Affine Models of the Joint Dynamics of Exchange Rates and Interest Rates
扩展了仿射期限结构模型，用于描述汇率与利率的联合动态，解决了利率低波动与汇率高波动如何协调的问题，并通过卡尔曼滤波估计了6个国家对的5因子模型。
Abstract This paper extends the affine class of term structure models to describe the joint dynamics of exchange rates and interest rates. In particular, the issue of how to reconcile the low volatility of interest rates with the high volatility of exchange rates is addressed. The incomplete market approach of introducing exchange rate volatility that is orthogonal to both interest rates and the pricing kernels is shown to be infeasible in the affine setting. Models in which excess exchange rate volatility is orthogonal to interest rates but not orthogonal to the pricing kernels are proposed and validated via Kalman filter estimation of maximal 5-factor models for 6 country pairs.