Mean reversion in US and international short rates
AbstractWe extend the CKLS one factor short rate model to include nonlinear mean reversion in a new way. We allow for extreme value mean reversion by including the smallest short rate during the previous year in the mean equation. The US short rate is found to exhibit extreme value mean reversion. The evidence of mean reversion varies across the short rates in the US and five other major markets (Canada, Germany, Japan, Switzerland, and the UK).
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Bibliographic InfoArticle provided by Elsevier in its journal The North American Journal of Economics and Finance.
Volume (Year): 21 (2010)
Issue (Month): 3 (December)
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Web page: http://www.elsevier.com/locate/inca/620163
Short term interest rate Mean reversion Extreme value Nonlinearity;
Other versions of this item:
- Charlotte Christiansen, 2008. "Mean Reversion in US and International Short Rates," CREATES Research Papers 2008-47, School of Economics and Management, University of Aarhus.
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
- E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
- C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
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