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Indirect Robust Estimation of the Short-term Interest Rate Process

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  • Czellar, Veronika

    (U of Geneva)

  • Karolyi, G. Andrew

    (Ohio State U)

  • Ronchetti, Elvezio

    (U of Geneva)

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 the 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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File URL: http://www.cob.ohio-state.edu/fin/dice/papers/2005/2005-4.pdf
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Bibliographic Info

Paper provided by Ohio State University, Charles A. Dice Center for Research in Financial Economics in its series Working Paper Series with number 2005-4.

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Date of creation: Feb 2005
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Handle: RePEc:ecl:ohidic:2005-4

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Citations

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Cited by:
  1. Loisel, Sébastien & Takane, Marina, 2009. "Fast indirect robust generalized method of moments," Computational Statistics & Data Analysis, Elsevier, vol. 53(10), pages 3571-3579, August.
  2. Charlotte Christiansen, 2007. "Level-ARCH Short Rate Models with Regime Switching: Bivariate Modeling of US and European Short Rates," CREATES Research Papers 2007-05, School of Economics and Management, University of Aarhus.
  3. 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.
  4. Peter Fuleky, 2011. "On the Choice of the Unit Period in Time Series Models," Working Papers 2011-4, University of Hawaii Economic Research Organization, University of Hawaii at Manoa.
  5. Veronika Czellar & Elvezio Ronchetti, 2008. "Accurate and robust indirect inference for diffusion models," Research Papers by the Institute of Economics and Econometrics, Geneva School of Economics and Management, University of Geneva 2008.01, Institut d'Economie et Econométrie, Université de Genève.
  6. 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.
  7. Laurini, Márcio Poletti & Hotta, Luiz Koodi, 2013. "Indirect Inference in fractional short-term interest rate diffusions," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 94(C), pages 109-126.
  8. repec:wyi:wpaper:001998 is not listed on IDEAS

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