Nonparametric estimation of multifactor continuous time interest rate models
Divisions of Research & Statistics and Monetary Affairs, Federal Reserve Board, 1999 - Business & Economics - 51 pages
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Ait—Sahalia algorithm Andersen and Lund bias bootstrapped quantiles Boudoukh BRSW estimator compute conditioning variables conﬁdence converge convergence in distribution data generating process diffusion functions distribution drift and diffusion Economics Discussion Series equations error measures estimated surfaces Euler Euler method Finance and Economics ﬁnding ﬁnds the bandwidth ﬁnite sample properties ﬁt hypothesis tests implied volatilities inefﬁciency inefficiency measure interest rate diffusion interest rate process k—sample kemel kernel estimator kernel regression L2 and Loo Louise Sheiner method misspeciﬁed model Monte Carlo simulations MSE MAE MAD nonlinearities Nonparametric Estimation null hypothesis optimal bandwidths panel of ﬁgure parameter values parametric estimator parametric model previous section rate drift function scaling factors September 1999 short rate signiﬁcant solution grid squared errors standard deviations stationary density stochastic volatility table reports term structure test statistics transition densities appear transition densities deﬁned Treasury data volatility diffusion volatility drift volatility process Wiener processes