Exploration of the Brazilian Term Structure in a Hidden Markov Framework
AbstractWe apply a hidden Markov model of the term structure to modeling the Brazilian swap rate curve. We examine the model''s characteristics and its performance in describing the cross-sectional and time-series dynamics of the term structure. Two regimes are identified, a high level and a high volatility regime and a low level and low volatility regime. Both regimes are persistent and are explained by the level and the slope of the term structure. The model is estimated using a Bayesian MCM algorithm that produces consistent standard errors and a reliable method for testing the differences between the model parameters.
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Bibliographic InfoPaper provided by International Monetary Fund in its series IMF Working Papers with number 11/22.
Date of creation: 01 Jan 2011
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Postal: International Monetary Fund, Washington, DC USA
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-02-26 (All new papers)
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