On Alternative Interest Rate Processes
1994 (English)Report (Other academic)
In this paper alternative interest rate processes are estimated, using the Generalized Method of Moments (GMM), on Swedish and Danish data. In line with the study by Chan, Karolyi, Longstaff and Sanders (1992) on US data, there seems to be a positive relation between interest rate level and volatility. In contrast to their study it is found that mean-reversion is important in order to not reject different model specifications of the interest rate. In addition, there is evidence of a structural change in the Danish interest rate process in April 1985, which may be due to a change in monetary policy. The small sample properties of the GMM estimates are also studied through simulations.
Place, publisher, year, edition, pages
Stockholm: IIES , 1994. , 32 p.
Seminar Paper / Institute for International Economic Studies, Stockholm University, ISSN 0347-8769 ; 578
conditional volatility, mean reversion, nominal interest rate modelling
IdentifiersURN: urn:nbn:se:su:diva-41902OAI: oai:DiVA.org:su-41902DiVA: diva2:342897