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The Volatility Structure of the Fixed Income Market under the HJM Framework: A Nonlinear Filtering Approach

This paper seeks to estimate a multifactor volatility model so as to describe the dynamics of interest rate markets, using data from the highly liquid but short term futures markets. The difficult problem of estimating such multifactor models is resolved by using a genetic algorithm to carry out the optimization procedure. The ability to successfully estimate a multifactor volatility model also eliminates the need to include a jump component, the existence of which would create difficulties in the practical use of interest rate models, such as pricing options or producing forecasts.

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File URL: http://www.business.uts.edu.au/qfrc/research/research_papers/rp150.pdf
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Paper provided by Quantitative Finance Research Centre, University of Technology, Sydney in its series Research Paper Series with number 150.

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Length: 14
Date of creation: 01 Jan 2005
Date of revision:
Handle: RePEc:uts:rpaper:150
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