Multiregime Term Structure Models
AbstractThe Ho and Lee model is the analogue for the study of the term structure of interest rates of the binomial tree introduced by Cox, Ross and Rubinstein in the one risky asset case. This model allows only for a small number of deformations of the term structure between two successive dates, and is therefore incompatible with available data. We propose here to reconcile tree approaches and statistical inference. We consider regime models for which the deformation of the term structure may behave randomly in each regime. Questions about constraints induced by no arbitrage are also addressed in a context of asymmetric information between traders and the econometrician in charge with the estimation.
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Bibliographic InfoPaper provided by Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) in its series Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) with number 1998002.
Date of creation: 01 Mar 1997
Date of revision: 00 Dec 1997
binomial model; term structure; interest rate; asymmetric information;
Other versions of this item:
- G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
- C4 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics
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- Clément, E. & Gourieroux, Christian & Monfort, Alain, 1997.
"Econometric specification of the risk neutral valuation model,"
CEPREMAP Working Papers (Couverture Orange)
- Clement, E. & Gourieroux, C. & Monfort, A., 2000. "Econometric specification of the risk neutral valuation model," Journal of Econometrics, Elsevier, vol. 94(1-2), pages 117-143.
- E, Clement & Christian Gourieroux & Alain Monfort, 1997. "Econometric Specification of the Risk Neutral Valuation Model," Working Papers 97-33, Centre de Recherche en Economie et Statistique.
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