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We estimate volatility of changes in the short-rate using data on the term structure of interest rates. That is, the latent volatility process is eobservedf through the cross-section of bond yields. In reality, however, the resulting volatility is often reported to move very differently from that estimated by time-series models such as GARCH ones. This indicates that the volatility acts as a factor for explaining the cross-sectional relation between yields, rather than as the conditional second moment for explaining the time-series behavior of the short-rate. The aim of the current research is at proposing stochastic volatility models of the short-rate that are relatively free of this tension, and estimating the volatility process that by construction contains more implications for interest-rate sensitive claims.