Fractional integration and the volatility of UK interest rates

We find that short rates are more nonstationary than longer rates and that differences in conditional volatility exist between different maturities. Therefore, their dynamics may be both maturity specific and country specific, and any a priori generalizing assumptions may be misleading.

► Interest rate dynamics may be both maturity specific and country specific. ► Generalizing a priori assumptions may be misplaced. ► UK nominal interest rates follow a fractionally integrated process. ► Long rates are less nonstationary than short rates in the UK. ► Asymmetries in conditional volatility exist between UK short and long rates.