Author : Theofanis Archontakis
Publisher :
Page : 45 pages
File Size : 25,59 MB
Release : 2007
Category :
ISBN : 9783865582669
Author : Theofanis Archontakis
Publisher :
Page : 56 pages
File Size : 45,27 MB
Release : 2016
Category :
ISBN :
This paper studies a nonlinear one-factor term structure model in discrete time. The single factor is the short-term interest rate, which is modeled as a self-exciting threshold autoregressive (SETAR) process. Our specification allows for shifts in the intercept and the variance. The process is stationary but mimics the nearly I(1) dynamics typically encountered with interest rates. In comparison with a linear model, we find empirical evidence in favor of the threshold model for Germany and the US. Based on the estimated short-rate dynamics we derive the implied arbitrage-free term structure of interest rates. Since analytical solutions are not feasible, bond prices are computed by means of Monte Carlo integration. The resulting term structure exhibits properties that are qualitatively similar to those observed in the data and which cannot be captured by the linear Gaussian one-factor model. In particular, our model captures the nonlinear relation between long rates and the short rate found in the data.
Author : Gerard A. Pfann
Publisher :
Page : pages
File Size : 17,23 MB
Release : 1999
Category :
ISBN :
This paper explores nonlinear dynamics for the time series of the short term interest rate in the United States. The proposed model is an autoregressive threshold model augmented by conditional heteroskedasticity. The performance of the model is evaluated by considering its implications for the term structure of interest rates. The nonlinear dynamics imply a form of nonlinearity in the levels relation between the long and the short rate. Empirical results indicate that the implied nonlinearity is present in the data.
Author : Pin Johnny Chung
Publisher :
Page : 183 pages
File Size : 25,73 MB
Release : 2003
Category :
ISBN :
This study utilized monthly averages of daily rates for the 10-year constant maturity Treasury note, the Ibbotson Bond Index with maturity of 20-year Treasury Index, and Moody's Aaa and Baa seasoned bond indices to investigate the threshold behavior of interest rates pairs. The data covered the period from January 1960 to December 1997, with a total of 456 observations for each variable. Three (Lo-Zivot 2001, Hansen-Seo 2002, and Enders-Siklos 2001) different non-linear, discontinuous, asymmetric time-series econometric alternatives were applied to investigate the dynamics of the four interest rates pairs. Forecasting accuracy evaluation was utilized for model evaluation by applying one-step-ahead up to six-step-ahead forecasts. Among the findings, it was ascertained that interest spreads are stationary, yet the speeds of adjustment are asymmetric. In a bivariate setting, all of the interest rates pairs followed the threshold cointegration behavior. All the interest rates pairs were shown to be threshold cointegrated. In general, the adjustment speeds were asymmetric and, especially, the threshold estimates were asymmetric in a three-regime environment. Long run equilibrium relationships existed between Moody's corporate bond indices and Treasury note and Ibbotson bond index. In general, for a one percent increase in Treasury rates (either Treasury note or Ibbotson index), in the long run, it will generate a more than one percent increase in corporate bond indices (Aaa or Baa). Furthermore, the Baa bond index was shown to have a greater sensitivity to interest rate changes than the Aaa bond index. For the model evaluation side, one-step-ahead forecast to six-step-ahead forecast performance evaluations were conducted for the threshold cointegration models and the counterpart of the linear cointegration models. The results showed that no one particular threshold cointegration model dictated the overall forecasting accuracy. For different interest rates pairs under consideration, different threshold cointegration models offered a better fit. Moreover, all of the linear cointegration models performed relatively less accurate than the threshold cointegration models, which reinforce the empirical applications of the threshold cointegration models.
Author : Tim Brailsford
Publisher :
Page : 32 pages
File Size : 11,3 MB
Release : 1998
Category :
ISBN :
This paper examines various models of the short-term interest rate in Australia. The analysis centres on three classes of models employing a comprehensive data set. First, the generalised diffusion model of Chan et al (1992) is examined which allows the variance to be a function of interest rate levels. This model nests a number of the early term structure models. We find initial support for the generalised model. Second, we examine models which incorporate time-varying volatility dynamics. Third, a class of models which incorporate both time-varying volatility and the levels model is analysed. We extend this model by allowing for an additional asymmetric reaction to news resulting in a threshold-type model. The paper examines each of the models and then proposes and performs prediction tests which allow different classes of model to be benchmarked. The second and third class of models appear to produce the most accurate estimates. The results indicate a number of important differences between the Australian market and overseas markets. We also find the results to be generally robust to various refinements in method.
Author : Pierluigi Balduzzi
Publisher :
Page : 18 pages
File Size : 36,78 MB
Release : 2008
Category :
ISBN :
We explore the link between the overnight fed funds rate, which is actively targeted by the Federal Reserve, and longer-maturity term fed funds rates. We develop a term-structure model which explicitly accounts for interest rate targeting and for the predictability of future target changes. The model is able to replicate some qualitative features of the dynamic behavior of deviations of short-term rates from the target.
Author : Ana-Maria Fuertes
Publisher :
Page : pages
File Size : 32,94 MB
Release : 2003
Category :
ISBN :
This paper explores the long run behaviour and short run dynamics of quarterly UK real interest rates, 1950-1999, in a threshold autoregressive framework. Using bootstrap LR extensions of the Enders and Granger (1998) threshold unit root and asymmetry tests, it finds support for sign and amplitude asymmetric mean reversion. These findings provide one explanation for the apparent persistence in real interest rates and are consistent with asymmetric feedback rules for inflation targeting.
Author : Pierluigi Balduzzi
Publisher :
Page : 34 pages
File Size : 47,41 MB
Release : 1997
Category : Interest rates
ISBN :
Author : Michael Dueker
Publisher :
Page : 0 pages
File Size : 29,41 MB
Release : 2013
Category :
ISBN :
In this article, we consider extensions of smooth transition autoregressive (STAR) models to situations where the threshold is a function of variables that affect the separation of regimes of the time series under consideration. Our specification is motivated by the observation that unusually high/low values for an economic variable may sometimes be best thought of in relative terms. State-dependent contemporaneous-threshold STAR and logistic STAR models are introduced and discussed. These models are also used to investigate the dynamics of US short-term interest rates, where the threshold is allowed to be a function of past output growth and inflation.
Author : Kees C. G. Koedijk
Publisher :
Page : pages
File Size : 11,57 MB
Release : 1999
Category :
ISBN :
In this paper we present and estimate a model of short-term interest rate volatility, that encompasses both the level effect of Chan, Karolyi, Longstaff and Sanders (1992) and the conditional heteroskedasticity effect of the GARCH class of models. This flexible specification allows different effects to dominate as the level of the interest rate varies. We also investigate implications for the pricing of discount bond options. Our findings indicate that the inclusion of a volatility effect in addition to a level effect in the model specification is particularly relevant for the pricing of shorter-term discount bond options.
