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Testing for continuous-time models of the short-term interest rate

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  • BROZE, L.
  • SCAILLET, O.
  • ZAKOà AN, J.-M.

Abstract

The recent financial literature has been much concerned with the short-term interest rate. Several models have been proposed and studied quite extensively. Despite the number of models, relatively little is known about their empirical comparison. A first approach of this problem is proposed in CHAN, KAROLYI, LONGSTAFF and SANDERS (1992) using a Generalized Method of Moments. In this paper, we give a general form encompassing the most usual models and derive a well specified discrete time version. Then we study the ergodic properties in order to build a consistent econometric procedure based on a maximum likelihood approach. An empirical comparison is performed using U.S. Treasury Bill data. Finally we propose an estimation strategy, based on a two-step indirect simulated method, to account for the discretization bias.
(This abstract was borrowed from another version of this item.)
(This abstract was borrowed from another version of this item.)
(This abstract was borrowed from another version of this item.)
(This abstract was borrowed from another version of this item.)
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Broze, L. & Scaillet, O. & Zakoã An, J.-M., 1995. "Testing for continuous-time models of the short-term interest rate," CORE Discussion Papers RP 1177, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  • Handle: RePEc:cor:louvrp:1177
    Note: In : of Empirical Finance, 2, 199-223, 1995
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    File URL: http://dx.doi.org/10.1016/0927-5398(95)00003-D
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    References listed on IDEAS

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