Goodness-of-fit test for interest rate models: An approach based on empirical processes
AbstractA new test for the goodness of fit of parametric forms of the drift and volatility functions of interest rate models is proposed. The test is based on a marked empirical process of the residuals. More specifically, a marked empirical process is constructed using estimators of the integrated regression function and the integrated conditional variance function for the drift function and the volatility function, respectively. Distributions of these processes are approximated using bootstrap techniques. This test is then applied to simulated classical financial models and is illustrated in an empirical application to a EURIBOR data set.
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Bibliographic InfoArticle provided by Elsevier in its journal Computational Statistics & Data Analysis.
Volume (Year): 55 (2011)
Issue (Month): 12 (December)
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Web page: http://www.elsevier.com/locate/csda
Integrated regression function Integrated conditional variance function Diffusion processes Empirical process Residuals;
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