Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
416884 | Computational Statistics & Data Analysis | 2011 | 20 Pages |
Abstract
A new test for the goodness of fit of parametric forms of the drift and volatility functions of interest rate models is proposed. The test is based on a marked empirical process of the residuals. More specifically, a marked empirical process is constructed using estimators of the integrated regression function and the integrated conditional variance function for the drift function and the volatility function, respectively. Distributions of these processes are approximated using bootstrap techniques. This test is then applied to simulated classical financial models and is illustrated in an empirical application to a EURIBOR data set.
Related Topics
Physical Sciences and Engineering
Computer Science
Computational Theory and Mathematics
Authors
Abelardo Monsalve-Cobis, Wenceslao González-Manteiga, Manuel Febrero-Bande,