No‐arbitrage priors, drifting volatilities, and the term structure of interest rates
无套利先验、时变波动率与利率期限结构
Abstract We use a Bayesian vector autoregression with stochastic volatility to forecast government bond yields. We form the conjugate prior from a no‐arbitrage affine term structure model. The model improves on the accuracy of point and density forecasts from a no‐change random walk and an affine term structure model with stochastic volatility. Our proposed approach may succeed by relaxing the no‐arbitrage affine term structure model's requirements that yields obey a factor…