Mean Reversion in US and International Short Rates
AbstractIn this paper we extend the CKLS one factor short rate model to include extreme value nonlinear mean reversion. Similarly to a recent stock market study, we include the smallest short rate during the previous year in the mean equation. We investigate the US and five other major markets (Canada, Germany, Japan, Switzerland, and the UK). There is extreme value mean reversion in the US short rate. For Japan there is both linear and nonlinear mean reversion. For the remaining short rates there is no evidence of mean reversion.
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Bibliographic InfoPaper provided by School of Economics and Management, University of Aarhus in its series CREATES Research Papers with number 2008-47.
Date of creation: 02 Sep 2008
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Web page: http://www.econ.au.dk/afn/
Short term interest rate; Mean reversion; Extreme value; Nonlinearity;
Other versions of this item:
- Christiansen, Charlotte, 2010. "Mean reversion in US and international short rates," The North American Journal of Economics and Finance, Elsevier, vol. 21(3), pages 286-296, December.
- 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-09-05 (All new papers)
- NEP-FMK-2008-09-05 (Financial Markets)
- NEP-MAC-2008-09-05 (Macroeconomics)
- NEP-MON-2008-09-05 (Monetary Economics)
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