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Assessing Italian Government bonds' term structure with CIR model in the aftermath of EMU

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  • Bernardo Maggi
  • Fabrizio Infortuna

Abstract

In this article we analyse the term structure of the Italian Government bonds after the adoption of Euro currency. In such a framework, we make use of the CIR model and deal with the degree of different volatilities of the maturities considered. To cope with this problem, we propose a simple correction formula and make use of a reaction function to take into account the influence of the monetary policy of the ECB with the result of considerably improving the performance of the model.

Suggested Citation

  • Bernardo Maggi & Fabrizio Infortuna, 2008. "Assessing Italian Government bonds' term structure with CIR model in the aftermath of EMU," Applied Financial Economics Letters, Taylor and Francis Journals, vol. 4(3), pages 163-170.
  • Handle: RePEc:taf:apfelt:v:4:y:2008:i:3:p:163-170
    DOI: 10.1080/17446540701689391
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    Cited by:

    1. Simona Delle Chiaie & Bernardo Maggi, 2014. "Italian Government debt liquidity, is it of value?," DSS Empirical Economics and Econometrics Working Papers Series 2014/3, Centre for Empirical Economics and Econometrics, Department of Statistics, "Sapienza" University of Rome.

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