Interest Rate Volatility and the Term Structure: A Two-Factor General Equilibrium Model
构建了一个双因子一般均衡模型，因子为短期利率及其波动性，推导出贴现债券和期权的闭式解，并用广义矩方法检验了模型的横截面约束。
We develop a two-factor general equilibrium model of the term structure. The factors are the short-term interest rate and the volatility of the short-term interest rate. We derive closed-form expressions for discount bonds and study the properties of the term structure implied by the model. The dependence of yields on volatility allows the model to capture many observed properties of the term structure. We also derive closed-form expressions for discount bond options. We use Hansen's generalized method of moments framework to test the cross-sectional restrictions imposed by the model. The tests support the two-factor model.