A Gaussian Approach for Continuous Time Models of Short Term Interest Rates
This paper proposes a Gaussian estimator for nonlinear continuous time models of the short-term interest rate. The approach is based on a stopping time argument that produces a normalizing transformation facilitating the use of a Gaussian likelihood. A Monte Carlo study shows that the finite-sample...
Saved in:
| Main Authors: | , |
|---|---|
| Format: | text |
| Language: | English |
| Published: |
Institutional Knowledge at Singapore Management University
2002
|
| Subjects: | |
| Online Access: | https://ink.library.smu.edu.sg/soe_research/501 https://ink.library.smu.edu.sg/context/soe_research/article/1500/viewcontent/gaussian.pdf |
| Tags: |
Add Tag
No Tags, Be the first to tag this record!
|
| Institution: | Singapore Management University |
| Language: | English |
| Summary: | This paper proposes a Gaussian estimator for nonlinear continuous time models of the short-term interest rate. The approach is based on a stopping time argument that produces a normalizing transformation facilitating the use of a Gaussian likelihood. A Monte Carlo study shows that the finite-sample performance of the proposed procedure offers an improvement over the discrete approximation method proposed by Nowman (1997). An empirical application to US and British interest rates is given. |
|---|