Author: Manuel Arapis
Publisher:
ISBN:
Category :
Languages : en
Pages :
Book Description
This study applies the nonparametric estimation procedure to the diffusion process modeling the dynamics of short-term interest rates. This approach allows us to operate in continuous time, estimating the continuous-time model, despite the use of discrete data. Three methods are proposed. We apply these methods to two important financial data. After selecting an appropriate bandwidth for each dataset, empirical comparisons indicate that the specification of the drift has a considerable impact on the pricing of derivatives through its effect on the diffusion function. In addition, a novel nonparametric test has been proposed for specification of linearity in the drift. Our simulation directs us to reject the null hypothesis of linearity at the 5% significance level for the two financial datasets.
Empirical Comparisons in Short-Term Interest Rate Models Using Nonparametric Methods
Comparison of the Short Term Interest Rate Models
Author: Mona Ben Salah
Publisher:
ISBN:
Category :
Languages : en
Pages : 12
Book Description
This article attempts to identify the best model of the short term interest rates that can predict its stochastic process over time. We studied nine different models of the short term interest rates. The choice of these models was the aim of analyzing the relevance of certain specifications of the the short term interest rate stochastic process, the effect of mean reversion and the sensitivity of the volatility to the level of interest rate.The yield on US three months treasury bills is used as a proxy for the short term interest rates. The parameters of the different stochastic process are estimated using the generalized method of moments. The results show that the effect of mean reversion is not statistically significant and that volatility is highly sensitive to the level of interest rates. To further study the performance prediction of the intertemporal behavior of the short term interest rate of the various models; we simulated their stochastic process for different periods.The results show that none of the studied models reproduce the actual path of the short term interest rates. The problem lies in the parametric specification of the mean and volatility of the diffusion process To further study the accurate parametric specification of the interest rate stochastic process we use a nonparametric estimation of the drift and the diffusion functions. The results prove that both should be nonlinear.
Publisher:
ISBN:
Category :
Languages : en
Pages : 12
Book Description
This article attempts to identify the best model of the short term interest rates that can predict its stochastic process over time. We studied nine different models of the short term interest rates. The choice of these models was the aim of analyzing the relevance of certain specifications of the the short term interest rate stochastic process, the effect of mean reversion and the sensitivity of the volatility to the level of interest rate.The yield on US three months treasury bills is used as a proxy for the short term interest rates. The parameters of the different stochastic process are estimated using the generalized method of moments. The results show that the effect of mean reversion is not statistically significant and that volatility is highly sensitive to the level of interest rates. To further study the performance prediction of the intertemporal behavior of the short term interest rate of the various models; we simulated their stochastic process for different periods.The results show that none of the studied models reproduce the actual path of the short term interest rates. The problem lies in the parametric specification of the mean and volatility of the diffusion process To further study the accurate parametric specification of the interest rate stochastic process we use a nonparametric estimation of the drift and the diffusion functions. The results prove that both should be nonlinear.
An Empirical Comparison of the Short Term Interest Rate Models
Author: Mona Ben Salah
Publisher:
ISBN:
Category :
Languages : en
Pages : 11
Book Description
This article attempts to identify the best model of the short term interest rates that can predict its stochastic process over time.We studied eight different models of interest rates in the short term. The choice of these models was the aim of analyzing the relevance of certain specifications of the stochastic process of the short term interest rates, the effect of mean reversion and the sensitivity of the volatility to the level of interest rate.The yield on three months treasury bills is used as a proxy for the short term interest rates. The parameters of the different stochastic process are estimated using the generalized method of moments. The results show that the effect of mean reversion is not statistically significant and that volatility is highly sensitive to the level of interest rates.To further study the performance prediction of the intertemporal behavior of the short term interest rate of the various models; we simulated their stochastic process for different periods.The results show that none of the studied models reproduce the actual path of the short term interest rates. The problem lies in the parametric specification of the mean and volatility of the diffusion process.
Publisher:
ISBN:
Category :
Languages : en
Pages : 11
Book Description
This article attempts to identify the best model of the short term interest rates that can predict its stochastic process over time.We studied eight different models of interest rates in the short term. The choice of these models was the aim of analyzing the relevance of certain specifications of the stochastic process of the short term interest rates, the effect of mean reversion and the sensitivity of the volatility to the level of interest rate.The yield on three months treasury bills is used as a proxy for the short term interest rates. The parameters of the different stochastic process are estimated using the generalized method of moments. The results show that the effect of mean reversion is not statistically significant and that volatility is highly sensitive to the level of interest rates.To further study the performance prediction of the intertemporal behavior of the short term interest rate of the various models; we simulated their stochastic process for different periods.The results show that none of the studied models reproduce the actual path of the short term interest rates. The problem lies in the parametric specification of the mean and volatility of the diffusion process.
Handbook of Financial Time Series
Author: Torben Gustav Andersen
Publisher: Springer Science & Business Media
ISBN: 3540712976
Category : Business & Economics
Languages : en
Pages : 1045
Book Description
The Handbook of Financial Time Series gives an up-to-date overview of the field and covers all relevant topics both from a statistical and an econometrical point of view. There are many fine contributions, and a preamble by Nobel Prize winner Robert F. Engle.
Publisher: Springer Science & Business Media
ISBN: 3540712976
Category : Business & Economics
Languages : en
Pages : 1045
Book Description
The Handbook of Financial Time Series gives an up-to-date overview of the field and covers all relevant topics both from a statistical and an econometrical point of view. There are many fine contributions, and a preamble by Nobel Prize winner Robert F. Engle.
Comparison of Alternative Models of the Short-term Interest Rate
Author: Xin Bo
Publisher:
ISBN:
Category : Interest rates
Languages : en
Pages : 0
Book Description
The paper proposes a procedure for testing the alternative continuous time models of short term riskless interest rates. Parameters estimation and models comparison are presented using the Generalized Method of Moments. An empirical research to LIBOR in US dollar is given and found that the volatility of interest rate changes is to be less sensitive to the interest rate levels in contrast to previous findings. In addition the Brennan-Schwartz model is suggested to be superior to the others in term of data fit under daily observations, and CIR SR model cannot be rejected.
Publisher:
ISBN:
Category : Interest rates
Languages : en
Pages : 0
Book Description
The paper proposes a procedure for testing the alternative continuous time models of short term riskless interest rates. Parameters estimation and models comparison are presented using the Generalized Method of Moments. An empirical research to LIBOR in US dollar is given and found that the volatility of interest rate changes is to be less sensitive to the interest rate levels in contrast to previous findings. In addition the Brennan-Schwartz model is suggested to be superior to the others in term of data fit under daily observations, and CIR SR model cannot be rejected.
Comparison of Alternative Models of the Short-term Interest Rate
Author: Xin Bo
Publisher:
ISBN:
Category : Interest rates
Languages : en
Pages : 54
Book Description
The paper proposes a procedure for testing the alternative continuous time models of short term riskless interest rates. Parameters estimation and models comparison are presented using the Generalized Method of Moments. An empirical research to LIBOR in US dollar is given and found that the volatility of interest rate changes is to be less sensitive to the interest rate levels in contrast to previous findings. In addition the Brennan-Schwartz model is suggested to be superior to the others in term of data fit under daily observations, and CIR SR model cannot be rejected.
Publisher:
ISBN:
Category : Interest rates
Languages : en
Pages : 54
Book Description
The paper proposes a procedure for testing the alternative continuous time models of short term riskless interest rates. Parameters estimation and models comparison are presented using the Generalized Method of Moments. An empirical research to LIBOR in US dollar is given and found that the volatility of interest rate changes is to be less sensitive to the interest rate levels in contrast to previous findings. In addition the Brennan-Schwartz model is suggested to be superior to the others in term of data fit under daily observations, and CIR SR model cannot be rejected.
Nonparametric Estimation and Comparisons in Stochastic Short-term Interest Rate Models
Author: Jiti Gao
Publisher:
ISBN:
Category :
Languages : en
Pages : 25
Book Description
Publisher:
ISBN:
Category :
Languages : en
Pages : 25
Book Description
Nonparametric Econometric Methods
Author: Qi Li
Publisher: Emerald Group Publishing
ISBN: 184950623X
Category : Business & Economics
Languages : en
Pages : 570
Book Description
Contains a selection of papers presented initially at the 7th Annual Advances in Econometrics Conference held on the LSU campus in Baton Rouge, Louisiana during November 14-16, 2008. This work is suitable for those who wish to familiarize themselves with nonparametric methodology.
Publisher: Emerald Group Publishing
ISBN: 184950623X
Category : Business & Economics
Languages : en
Pages : 570
Book Description
Contains a selection of papers presented initially at the 7th Annual Advances in Econometrics Conference held on the LSU campus in Baton Rouge, Louisiana during November 14-16, 2008. This work is suitable for those who wish to familiarize themselves with nonparametric methodology.
Pricing Interest-Rate Derivatives
Author: Markus Bouziane
Publisher: Springer Science & Business Media
ISBN: 3540770666
Category : Business & Economics
Languages : en
Pages : 207
Book Description
The author derives an efficient and accurate pricing tool for interest-rate derivatives within a Fourier-transform based pricing approach, which is generally applicable to exponential-affine jump-diffusion models.
Publisher: Springer Science & Business Media
ISBN: 3540770666
Category : Business & Economics
Languages : en
Pages : 207
Book Description
The author derives an efficient and accurate pricing tool for interest-rate derivatives within a Fourier-transform based pricing approach, which is generally applicable to exponential-affine jump-diffusion models.
The Quarterly Review of Economics and Finance
Author:
Publisher:
ISBN:
Category : Business
Languages : en
Pages : 508
Book Description
Publisher:
ISBN:
Category : Business
Languages : en
Pages : 508
Book Description