Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5091001 | Journal of Banking & Finance | 2008 | 10 Pages |
Abstract
We propose a new approach for estimating the coefficients of the term structure equation by means of the volatility of the interest rates and the slope of the yield curve. One advantage of this approach consists in the fact that the drift and the market price of risk are jointly estimated and need not be individually specified. We then generate trajectories in a test problem to investigate the finite properties of this approach. Our simulation results show that this new approach outperforms the classic nonparametric models in the literature. Finally, an application to USA Treasury Bill data is also illustrated.
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Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Lourdes Gómez-Valle, Julia MartÃnez-RodrÃguez,