The researchers developed a model to analyze interest rate risk, allowing for changing volatility in yield factors. By using a simulation-based method, they found that including stochastic volatility in the model improved accuracy and reduced uncertainty in predicting interest rates, especially during low-volatility periods. The study showed that volatility in interest rates changes over time, with level and slope volatility being the most persistent. The approach used in the study efficiently estimated the model and can be adapted for different types of dynamic factor models.