Reg_K1Q function

Estimate the risk-neutral feedbak matrix K1Q using linear regressions

Reg_K1Q(Y, mat, Z, dt, type)

Arguments

• Y: matrix of yields used in estimation (J x T)
• mat: vector of maturities (in years) of yields used in estimation (J x 1)
• Z: pricing factors (can be yields-based or non-yields/macro variables) (N x T)
• dt: time unit of the model (scalar). For instance, if data is (i) monthly, dt <- 12; (ii) quarterly, dt <- 4; (iii) yearly, dt <- 1.
• type: 'Jordan' -> K1Q will be of the Jordan type

Returns

Risk neutral feedback matrix K1Q.

References

This function is modified version of the "Reg_K1Q" function by Le and Singleton (2018).

"A Small Package of Matlab Routines for the Estimation of Some Term Structure Models."

(Euro Area Business Cycle Network Training School - Term Structure Modelling). Available at: https://cepr.org/40029