I have a question on econometric modelling techniques for decomposition. I have three variables:
- V1 which is an indicator of an interest rate risk premia
- V2 which is an indicator of a credit risk premia
- V3 which is an indicator of a liquidity risk premia.
While in theory the relationship of: V1 = V2 + V3 should hold; I'm struggling to find a good modelling technique that can decompose V1 into subcomponents that relate to V2 and V3. I am searching for something beyond a vector auto-regressive model.