Interbank interest rates and the risk premium
Bank for International Settlements, Monetary and Economic Dept., 1999 - Business & Economics - 33 pages
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12 months afﬁne model arbitrage autocorrelation coefﬁcients average yield curve Bessel function central tendency model changes in yields continuous-time correlation covariance matrix deﬁned Dufﬁe econometric econometric methods equilibrium model error term Eurodollar ex post excess kurtosis expectations hypothesis expected change expected yield changes factor loading ﬁnd ﬁrst ﬁt ﬁtting errors forward rates Forward spreads future short rates hump-shaped implied instantaneous interest rate interbank interest rates interbank rates interest rate swap Kalman ﬁlter Libor ﬁxings Libor rates likelihood likelihood function mean reversion parameter measurement errors months 6 months negative no-measurement-error assumption number of factors observed one-factor model one-month rate overidentifying restrictions p-values parameter estimates predictability pattem prediction errors premia price of risk regression slope Remolona retum risk premium rollover spread sample single factor six-month Libor standard deviations stochastic differential equation Table term premium time-varying unconditional variable variance volatility curve weekly changes yield spread regressions