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Title: Notes on the Yield Curve

Author(s): Ian Martin and Stephen Ross

Publication Date: September 2018

Keyword(s): Cheeger inequality, eigenvalue gap, recovery theorem, term structure, traps and yield curve

Programme Area(s): Financial Economics

Abstract: We study the properties of the yield curve under the assumptions that (i) the fixed-income market is complete and (ii) the state vector that drives interest rates follows a finite discrete-time Markov chain. We focus in particular on the relationship between the behavior of the long end of the yield curve and the recovered time discount factor and marginal utilities of a pseudo-representative agent; and on the relationship between the "trappedness" of an economy and the convergence of yields at the long end.

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Bibliographic Reference

Martin, I and Ross, S. 2018. 'Notes on the Yield Curve'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=13176