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Corrigendum to “A Gaussian Approach for Continuous Time Models of the Short Term Interest Rate"

  • Peter C.B. Phillips


    (Yale University)

  • Jun Yu


    (School of Economics, Singapore Management University)

An error is corrected in Yu and Phillips (2001) (Econometrics Journal, 4, 210-224) where a time transformation was used to induce Gaussian disturbances in the discrete time equivalent model. It is shown that the error process in this model is not a martingale and the Dambis, Dubins-Schwarz (DDS) theorem is not directly applicable. However, a detrended error process is a martingale, the DDS theorem is applicable, and the corresponding stopping time correctly induces Gaussianity. We show that the two stopping time sequences differ by O(a2), where a is the pre-specified normalized timing constant.

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Paper provided by Singapore Management University, School of Economics in its series Working Papers with number 18-2010.

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Length: 5 pages
Date of creation: Oct 2010
Date of revision:
Publication status: Published in SMU Economics and Statistics Working Paper Series
Handle: RePEc:siu:wpaper:18-2010
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