Modelling Spot Rate Process in the Russian Treasury Bills Market
The paper deals with modelling of spot rate process in the market for government securities in transitional economy. The case of the Russian Treasury bills market is taken as an example. We use three approaches to estimation of parameters of spot rate stochastic process: AR-GARCH time series models, GMM estimates and stochastic volatility models (QML estimates and Kalman filter). The most general conclusion is that pattern of spot rate process in transitional economy can be nested in existing theoretical model of term structure of interest rates. Estimated parameters of the spot rate process indicate that the Russian market for government securities by its features is closer to the European financial markets compared to the market for US Treasury bills. This conclusion is supported by estimates of parameters of the GKO spot rate stochastic process using both the GMM and QML estimates of spot rate nonlinear models. The Cox-Ingersoll-Ross 1985 model of term structure of interest rates is the most adequate for the Russian GKO market. The behaviour of the term structure of GKO yields in 1994 through 1998 did not contradict to theoretical conclusions from the model; analytical yield curves have satisfactory accuracy of approximation of actual GKO yield curves. The spot rate stochastic process is mean-reverting, but its variance although being stochastic does not exhibit mean-reverting property (according to Kalman filter estimates). The stochastic nature of spot rate volatility origins from different responses to 'good' and 'bad' news and a proportion to current spot rate level (but less than one by one).
|Date of creation:||2000|
|Date of revision:||2000|
|Contact details of provider:|| Postal: 3-5 Gazetny lane, Moscow, 125009|
Phone: (495) 629-6413
Fax: (495) 203-8816
Web page: http://www.iep.ru/
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:gai:wpaper:0018. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Victor Hugues)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.