PT  - JOURNAL ARTICLE
AU  - Henri Pagès
TI  - Interbank Interest Rates and the Risk Premium
AID  - 10.3905/jfi.2000.319256
DP  - 2000 Mar 31
TA  - The Journal of Fixed Income
PG  - 75--95
VI  - 9
IP  - 4
4099  - https://pm-research.com/content/9/4/75.short
4100  - https://pm-research.com/content/9/4/75.full
AB  - The article presents a one-factor affine model of the term structure of LIBOR with autocorrelated measurement errors. It can be viewed as a central tendency model; the theoretical arbitrage-free rates serve as stochastic means to which the observed rates revert. Two estimation techniques are compared, one based on a no measurement error assumption, the other on Kalman filtering. The estimates are then used in standard yield spread regressions with a view to accounting for the departure of future short rates from what the expectations hypothesis would predict.