Dimension-Invariant Dynamic Term Structures - LAURENT CALVET, HEC Paris, presents his paper (coauthored with Adlai J. Fisher and Liuren Wu). We develop a class of dynamic term structure models that accommodates arbitrarily many interest-rate factors with very few parameters. The model builds on a short-rate cascade, a parsimonious recursive structure that naturally ranks the latent state variables by their rates of mean reversion, each revolving around the next lowest-frequency factor. With appropriate assumptions on volatilities and risk premia, the model overcomes the curse of dimensionality associated with general affine models. Using a panel of 15 LIBOR and swap rates, we estimate models using from one to 15 factors and only five parameters. The in-sample fit of high-dimensional specifications is near exact, with absolute pricing errors averaging less than one basis point, permitting yield-curve stripping in an arbitrage-free, dynamically consistent environment. Cross-maturity correlations accurately reflect empirical evidence, and out-of-sample interest rate forecasts significantly improve on prior benchmarks. The 2nd HEC Finance and Statistics Conference was held in Paris on October 8, 2010. It was organized by Laurent Calvet and Veronika Czellar, HEC Paris. The conference program is available at http://www.hec.fr/financeandstatistics2010.