There is strong evidence that interest rates and bond yield
movements exhibit both stochastic volatility and unanticipated
jumps. The presence of frequent jumps makes it natural to ask
whether there is a premium for jump risk embedded in observed bond
yields. This paper identifies a class of jump-diffusion models that
are successful in approximating the term structure of interest
rates of emerging markets. The parameters of the term structure of
interest rates are reconciled with the associated bond yields by
estimating the volatility and jump risk premia in highly volatile
markets. Using the simulated method of moments (SMM), results
suggest that all variants of models which do not take into account
stochastic volatility and unanticipated jumps cannot generate the
non-normalities consistent with the observed interest rates. Jumps
occur (8,10) times a year in Argentina and Brazil, respectively.
The size and variance of these jumps is also of statistical
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