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Indirect robust estimation of the short-term interest rate process

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  • Czellar, Veronika
  • Karolyi, G. Andrew
  • Ronchetti, Elvezio

Abstract

We introduce Indirect Robust Generalized Method of Moments (IRGMM), a new simulation-based estimation methodology, to model short-term interest rate processes. The primary advantage of IRGMM relative to classical estimators of the continuous-time short-rate diffusion processes is that it corrects both errors due to discretization and the errors due to model misspecification. We apply this new approach to various monthly and weekly Eurocurrency interest rate series.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Empirical Finance.

Volume (Year): 14 (2007)
Issue (Month): 4 (September)
Pages: 546-563

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Handle: RePEc:eee:empfin:v:14:y:2007:i:4:p:546-563

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Web page: http://www.elsevier.com/locate/jempfin

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References

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Citations

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Cited by:
  1. Peter Fuleky, 2011. "On the Choice of the Unit Period in Time Series Models," Working Papers 201111, University of Hawaii at Manoa, Department of Economics.
  2. Hou, Ai Jun & Suardi, Sandy, 2011. "Modelling and forecasting short-term interest rate volatility: A semiparametric approach," Journal of Empirical Finance, Elsevier, vol. 18(4), pages 692-710, September.
  3. Christiansen, Charlotte, 2008. "Level-ARCH short rate models with regime switching: Bivariate modeling of US and European short rates," International Review of Financial Analysis, Elsevier, vol. 17(5), pages 925-948, December.
  4. Veronika Czellar & Elvezio Ronchetti, 2008. "Accurate and robust indirect inference for diffusion models," Research Papers by the Department of Economics, University of Geneva 2008.01, Département des Sciences Économiques, Université de Genève.
  5. Loisel, Sébastien & Takane, Marina, 2009. "Fast indirect robust generalized method of moments," Computational Statistics & Data Analysis, Elsevier, vol. 53(10), pages 3571-3579, August.
  6. Asimit, Alexandru V. & Badescu, Alexandru M. & Verdonck, Tim, 2013. "Optimal risk transfer under quantile-based risk measurers," Insurance: Mathematics and Economics, Elsevier, vol. 53(1), pages 252-265.

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