COWLES FOUNDATION FOR RESEARCH IN ECONOMICS
AT YALE UNIVERSITY

Box 208281
New Haven, CT 06520-8281

COWLES FOUNDATION DISCUSSION PAPER NO. 1311

Nonparametric Estimation of a Multifactor Heath-Jarrow-Morton Model:
An Integrated Approach

Andrew Jeffrey, Oliver Linton, Thong Nguyen, and Peter C.B. Phillips

July 2001

We develop a nonparametric estimator for the volatility structure of the zero coupon yield curve in the Heath, Jarrow-Morton framework. The estimator incorporates cross-sectional restrictions along the maturity dimension, and also allows for measurement errors, which arise from the estimation of the yield curve from noisy data. The estimates are implemented with daily CRSP bond data.

Keywords: Measurement error, multifactor model, nonparametric estimation, volatility structure

JEL Classification: C22