Interbank interest rates and the risk premium
The paper presents a one-factor affine model of the term structure of Libor rates with autocorrelated measurement errors. It can be viewed as a central tendency model, with the theoretical arbitrage-free rates serving as stochastic means to which the observed rates revert. Two estimation techniques are compared, one based on a no-measurement-error assumption, the other on Kalman filtering. The estimates are then used in standard yield spread regressions with a view to accounting for the departure of future short rates from what the expectations hypothesis would predict.
|Date of creation:||Nov 1999|
|Date of revision:|
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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Michael J. Fleming & Eli M. Remolona, 1999.
"The term structure of announcement effects,"
76, Federal Reserve Bank of New York.
- Peña Sánchez de Rivera, Juan Ignacio & Moreno, Manuel, 1995.
"On the term structure of Interbank interest rates: jump-diffusion processes and option pricing,"
DES - Working Papers. Statistics and Econometrics. WS
7074, Universidad Carlos III de Madrid. Departamento de Estadística.
- Manuel Moreno & Juan I. Peña, 1996. "On the term structure of Interbank interest rates: Jump-diffusion processes and option pricing," Economics Working Papers 191, Department of Economics and Business, Universitat Pompeu Fabra.
- Farshid Jamshidian, 1997. "LIBOR and swap market models and measures (*)," Finance and Stochastics, Springer, vol. 1(4), pages 293-330.
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