Gaussian estimation of continuous time models of the short term interest rate

• Main Authors: YU, Jun, PHILLIPS, Peter C. B.
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2001
• Subjects: Gaussian Estimation; Nonlinear Diffusion; Normalizing Transformation; Econometrics; Finance
• Online Access: https://ink.library.smu.edu.sg/soe_research/2114; https://ink.library.smu.edu.sg/context/soe_research/article/3114/viewcontent/SSRN_id278539__1_.pdf
• Institution: Singapore Management University

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...