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Deconstructing the yield curve
We investigate the factor structure of the term structure of interest rates and argue that characterizing the minimal dimension of the data generating process is more challenging than currently appreciated. As a result, inference procedures for yield curve models that commit to a parsimoniously parameterized factor structure may be omitting important information about the underlying true factor space. To circumvent these difficulties, we introduce a novel nonparametric bootstrap that is robust to general forms of time and cross-sectional dependence and conditional heteroskedasticity of ...