|
EconStor >
Humboldt-Universität Berlin >
Sonderforschungsbereich 649: Ökonomisches Risiko, Humboldt-Universität Berlin >
SFB 649 Discussion Papers, HU Berlin >
Please use this identifier to cite or link to this item:
http://hdl.handle.net/10419/39290
|
| | |
| Title: | | Adaptive interest rate modelling  |
| Authors: | | Guo, Mengmeng Härdle, Wolfgang Karl |
| Issue Date: | | 2010 |
| Series/Report no.: | | SFB 649 discussion paper 2010,029 |
| Abstract: | | A good description of the dynamics of interest rates is crucial to price derivatives and to hedge corresponding risk. Interest rate modelling in an unstable macroeconomic context motivates one factor models with time varying parameters. In this paper, the local parameter approach is introduced to adaptively estimate interest rate models. This method can be generally used in time varying coefficient parametric models. It is used not only to detect the jumps and structural breaks, but also to choose the largest time homogeneous interval for each time point, such that in this interval, the coefficients are statistically constant. We use this adaptive approach and apply it in simulations and real data. Using the three month treasure bill rate as a proxy of the short rate, we nd that our method can detect both structural changes and stable intervals for homogeneous modelling of the interest rate process. In more unstable macroeconomy periods, the time homogeneous interval can not last long. Furthermore, our approach performs well in long horizon forecasting. |
| Subjects: | | CIR model Interest rate Local parametric approach Time homogeneous interval Adaptive statistical techniques |
| JEL: | | E44 G12 G32 N22 |
| Document Type: | | Working Paper |
| Appears in Collections: | | SFB 649 Discussion Papers, HU Berlin
|
| |
| | |
Download bibliographical data as:
BibTeX
|
| |
Share on:http://hdl.handle.net/10419/39290
|
Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.
|