Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5091420 | Journal of Banking & Finance | 2006 | 22 Pages |
Abstract
This paper provides a comprehensive analysis of the short-term interest-rate dynamics based on three different data sets and two flexible parametric specifications. The significance of nonlinearity in the short-rate drift declines with increasing maturity for the interest-rate series used in the study. Using a flexible diffusion specification and incorporating GARCH volatility and non-normal innovation reduce the need for a nonlinear drift specification. Finally, the nonlinear drift specification performs better than the linear drift specification only when the short-term interest-rate levels reach historical highs.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Turan G. Bali, Liuren Wu,