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st: Term Structure Models


From   Suranjan Jayathilaka <u.s.s.jayathilaka@keele.ac.uk>
To   statalist@hsphsun2.harvard.edu
Subject   st: Term Structure Models
Date   Wed, 13 Feb 2013 13:56:46 -0800

Dear statalist,

I have the below observation equation Xt;

Xt= (p)+(q)Xt-1+(r)ert     (1)

p, q and r are VAR parameters, which can be estimated by running a VAR.

Yield Yt is a linear function of An and Bn, where n is the time to maturity.

An and Bn should satisfy the following recursive restrictions to rule
out the arbitrage;

Yt= An+BnXt+vt    (2)

Bn=B'n-1(q-rlamda1)-i'

An=An-1+B'n-1(p-rlamda0)+(1/2)B'n-1rr'Bn-1

I need to estimate lamda0 and lamda1, while minimizing the sum of
squared fitting errors of
equation (2).

There are codes to estimate these types of affine term structure
models using MATLAB.
However, is there any user  written programme in Stata to estimate
these types of models?
If not, how can we do this in Stata?

Thank you.
Sadeeptha Jayathilaka
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