TY  - SER
AU  - Realdon Marco
TI  - Target Rate and Term Structure of Interest Rates
PY  - 0000///0
CY  - 
PB  - Feb 2008
KW  - Interest Rates, Targeting
N2  - This paper presents a tractable bond valuation model, which further develops the approach proposed by Piazzesi (2005). The short-term inter-bank interest rate is equal to the target rate set by the central bank plus a spread. Bond yields are driven by the expected changes to the target interest rate. Unlike in Piazzesi (2005), accurate approximations provide closed-form solutions for discount bond prices that require no numerical integration. Unlike in Piazzesi, the target interest rate can be constrained to be non-negative and also the nominal short interest rate can virtually always be non-negative. Yields, especially long-term ones, decrease when the central bank is expected to decide more frequent and/or larger changes in the target interest rate. Closed form approximations to likelihood functions simplify model estimation
UR  - http://192.168.6.13/libsuite/mm_files/Articles/AR9838.pdf
ER  -