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Overnight Index Rate: Model, calibration and simulation

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  • Olga Yashkir
  • Yuri Yashkir

Abstract

In this study, the extended Overnight Index Rate (OIR) model is presented. The fitting function for the probability distribution of the OIR daily returns is based on three different Gaussian distributions which provide modelling of the narrow central peak and the wide fat-tailed component. The calibration algorithm for the model is developed and investigated using the historical OIR data.

Suggested Citation

  • Olga Yashkir & Yuri Yashkir, 2014. "Overnight Index Rate: Model, calibration and simulation," Cogent Economics & Finance, Taylor & Francis Journals, vol. 2(1), pages 1-11, December.
    • Handle: RePEc:taf:oaefxx:doi:10.1080/23322039.2014.936955
    DOI: 10.1080/23322039.2014.936955
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    References listed on IDEAS

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    1. Das, Sanjiv R., 2002. "The surprise element: jumps in interest rates," Journal of Econometrics, Elsevier, vol. 106(1), pages 27-65, January.
    2. Olga Yashkir & Yuri Yashkir, 2003. "Modelling of stochastic fat-tailed auto-correlated processes: an application to short-term rates," Quantitative Finance, Taylor & Francis Journals, vol. 3(3), pages 195-200.
    3. Mattia Raudaschl, 2012. "A jump-diffusion model for the euro overnight rate," Quantitative Finance, Taylor & Francis Journals, vol. 12(1), pages 149-165, December.
    4. Ángel León & Francis Benito & Juan Nave, 2006. "Modeling The Euro Overnight Rate," Working Papers. Serie AD 2006-11, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    5. Yashkir, Olga & Yashkir, Yuriy, 2003. "Modelling of stochastic fat-tailed auto-correlated processes: an application to short-term rates," MPRA Paper 46391, University Library of Munich, Germany.
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