کد مقاله | کد نشریه | سال انتشار | مقاله انگلیسی | نسخه تمام متن |
---|---|---|---|---|
698541 | 890413 | 2006 | 13 صفحه PDF | دانلود رایگان |
![عکس صفحه اول مقاله: The volatility of the instantaneous spot interest rate implied by arbitrage pricing—A dynamic Bayesian approach The volatility of the instantaneous spot interest rate implied by arbitrage pricing—A dynamic Bayesian approach](/preview/png/698541.png)
This paper considers the estimation of the volatility of the instantaneous short interest rate from a new perspective. Rather than using discretely compounded market rates as a proxy for the instantaneous short rate of interest, we derive a relationship between observed LIBOR rates and certain unobserved instantaneous forward rates. We determine the stochastic dynamics for these rates under the risk-neutral measure and propose a filtering estimation algorithm for a time-discretised version of the resulting interest rate dynamics based on dynamic Bayesian updating in order to estimate the volatility function. Our time discretisation can be justified by the fact that data are observed discretely in time. The method is applied to US Treasury rates of various maturities to compute a (posterior) distribution for the parameters of the volatility specification.
Journal: Automatica - Volume 42, Issue 8, August 2006, Pages 1381–1393