Comparison Of Alternative Models Of The Short Term Interest Rate
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| Author | : Xin Bo |
| Publisher | : |
| Total Pages | : 0 |
| Release | : 2006 |
| Genre | : Interest rates |
| ISBN | : |
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.
| Author | : Xin Bo |
| Publisher | : |
| Total Pages | : 54 |
| Release | : 2006 |
| Genre | : Interest rates |
| ISBN | : |
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.
| Author | : K. C. Chan |
| Publisher | : |
| Total Pages | : 18 |
| Release | : 1991 |
| Genre | : Interest rates |
| ISBN | : |
| Author | : Clark Leavitt |
| Publisher | : |
| Total Pages | : 418 |
| Release | : 1987 |
| Genre | : Accounting fraud |
| ISBN | : |
| Author | : Basma Bekdache |
| Publisher | : |
| Total Pages | : 41 |
| Release | : 1994 |
| Genre | : |
| ISBN | : |
| Author | : Mona Ben Salah |
| Publisher | : |
| Total Pages | : 11 |
| Release | : 2014 |
| Genre | : |
| ISBN | : |
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.
| Author | : Wolfgang Bühler |
| Publisher | : |
| Total Pages | : 76 |
| Release | : 1995 |
| Genre | : |
| ISBN | : |
| Author | : Sanjiv R. Das |
| Publisher | : |
| Total Pages | : 39 |
| Release | : 1994 |
| Genre | : |
| ISBN | : |
This paper develops and empirically implements a two-factor model of the term structure of interest rates. In addition to the short rate, the additional factor is the mean level of the interest rate. Closed-form solutions for bond prices where the mean follows either a jump process or a diffusion process are provided. The model has sufficiently general theoretical foundations to enable estimation of the time path of the mean interest rate level without specifying a functional form for the stochastic behavior of the mean level. This constitutes a simple methodology which exploits the mathematical structure of the partial differential equations defining bond prices. The pricing performance of the model relative to other models is assessed. The model is also able to capture features of the long end of the term structure.
| Author | : Mona Ben Salah |
| Publisher | : |
| Total Pages | : 12 |
| Release | : 2014 |
| Genre | : |
| ISBN | : |
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.
| Author | : Mr.Vadim Khramov |
| Publisher | : International Monetary Fund |
| Total Pages | : 27 |
| Release | : 2013-10-17 |
| Genre | : Business & Economics |
| ISBN | : 147559464X |
This paper sheds light on a narrow but crucial question in finance: What should be the parameters of a model of the short-term real interest rate? Although models for the nominal interest rate are well studied and estimated, dynamics of the real interest rate are rarely explored. Simple ad hoc processes for the short-term real interest rate are usually assumed as building blocks for more sophisticated models. In this paper, parameters of the real interest rate model are estimated in the broad class of single-factor interest rate diffusion processes on U.S. monthly data. It is shown that the elasticity of interest rate volatility—the relationship between the volatility of changes in the interest rate and its level—plays a crucial role in explaining real interest rate dynamics. The empirical estimates of the elasticity of the real interest rate volatility are found to be about 0.5, much lower than that of the nominal interest rate. These estimates show that the square root process, as in the Cox-Ingersoll-Ross model, provides a good characterization of the short-term real interest rate process.
