Introduction of stochastic volatility into term structure models and its economic evaluation

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It has been known that the introduction of stochastic volatility into term structure models is not straightforward. Based on this issue, the main achievements of this research are to find (1) a way to make the introduction more effective for improving the descriptive power of models, and (2) that the dynamics of interest rate volatility estimated with and without imposing no-arbitrage conditions do not much differ. By these findings, an economic evaluation of the introduction can be feasible using various types of models.