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Modelling and Forec...
Modelling and Forecasting Short-Term Interest Rate Volatility: A Semiparametric Approach
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- HOU, Ai Jun (författare)
- Stockholms universitet,Lund University,Lunds universitet,Nationalekonomiska institutionen,Ekonomihögskolan,Department of Economics,Lund University School of Economics and Management, LUSEM,Finansiering
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Suardi, Sandy (författare)
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(creator_code:org_t)
- Elsevier BV, 2011
- 2011
- Engelska.
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Ingår i: Journal of Empirical Finance. - : Elsevier BV. - 0927-5398 .- 1879-1727. ; 18:4, s. 692-710
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Abstract
Ämnesord
Stäng
- This paper employs a semiparametric procedure to estimate the diffusion process of short-term interest rates. The Monte Carlo study shows that the semiparametric approach produces more accurate volatility estimates than models that accommodate asymmetry, levels e¤ect and serial dependence in the conditional variance. Moreover, the semiparametric approach yields robust volatility estimates even if the short rate drift function and the underlying innovation distribution are misspeci.ed. Empirical investigation with the U.S. three-month Treasury bill rates suggests that the semipara-metric procedure produces superior in-sample and out-of-sample forecast of short rate changes volatility compared with the widely used single-factor diffusion models. This forecast improvement has implications for pricing interest rate derivatives.
Ämnesord
- SAMHÄLLSVETENSKAP -- Ekonomi och näringsliv -- Nationalekonomi (hsv//swe)
- SOCIAL SCIENCES -- Economics and Business -- Economics (hsv//eng)
- SAMHÄLLSVETENSKAP -- Ekonomi och näringsliv -- Företagsekonomi (hsv//swe)
- SOCIAL SCIENCES -- Economics and Business -- Business Administration (hsv//eng)
Nyckelord
- Volatility esti- mation
- GARCH modelling
- Nonparametric method
- Forecasts
- Interest rates; GARCH modelling; Nonparametric method; Volatility estimation; Forecasts
Publikations- och innehållstyp
- art (ämneskategori)
- ref (ämneskategori)
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