A two-factor model of the U.K. yield curve

James M. Steeley

Research output: Contribution to journalArticlepeer-review


I model the forward premium in the U.K. gilt-edged market over the period 1982–96 using a two-factor general equilibrium model of the term structure of interest rates. The model permits the decomposition of the forward premium into separate components representing interest rate expectations, the risk premia associated with each of the underlying factors, and terms capturing the direct impact of the variances of the factors on the shape of the forward curve.
Original languageEnglish
Pages (from-to)32-58
Number of pages27
JournalManchester School
Issue numberS
Publication statusPublished - 1997


  • I model
  • gilt-edged market
  • two-factor general equilibrium model
  • term structure
  • interest rates


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