Drift and Diffusion Function Specification for Short-Term Interest Rates

Various stochastic differential equation models for short rates (rt) have been proposed, where the change (Δrt = rt−rt−1) is modeled as a sum of drift and diffusion terms depending on rt−1. These models, however, have some shortcomings. First, the same model may not apply to all countries. Second, t...

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Bibliographic Details
Main Authors: LEE, Myoung-jae, LI, Wen Juan
Format: text
Language:English
Published: Institutional Knowledge at Singapore Management University 2005
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Online Access:https://ink.library.smu.edu.sg/soe_research/177
https://ink.library.smu.edu.sg/context/soe_research/article/1176/viewcontent/DriftDiffusionFunction_Specification_2005.pdf
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Institution: Singapore Management University
Language: English