Estimating the Term Structure of Volatility in Futures Yield - A Maximum Likelihood Approach
The volatility structure of 90-day bill futures traded on the the Sydney Futures Exchange is analysed within the framework of the Heath-Jarrow-Morton model. The method involves characterisation of the transition probability density function for the forward rate process represented by the stochastic differential equation in the arbitrage-free economy. Maximisation of the likelihood function then results in the estimates of the parameters of the volatility function. The volatility function is also used in a simulation of the preference-free stochastic differential equation for bill prices.
|Date of creation:||01 Dec 1995|
|Contact details of provider:|| Postal: PO Box 123, Broadway, NSW 2007, Australia|
Phone: +61 2 9514 7777
Fax: +61 2 9514 7711
Web page: http://www.uts.edu.au/about/uts-business-school/finance
More information through EDIRC
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.:
- Lo, Andrew W., 1988.
"Maximum Likelihood Estimation of Generalized Itô Processes with Discretely Sampled Data,"
Cambridge University Press, vol. 4(02), pages 231-247, August.
- Andrew W. Lo, "undated". "Maximum Likelihood Estimation of Generalized Ito Processes with Discretely Sampled Data," Rodney L. White Center for Financial Research Working Papers 15-86, Wharton School Rodney L. White Center for Financial Research.
- Andrew W. Lo, 1986. "Maximum Likelihood Estimation of Generalized Ito Processes with Discretely Sampled Data," NBER Technical Working Papers 0059, National Bureau of Economic Research, Inc.
- Duffie, Darrell & Singleton, Kenneth J, 1993. "Simulated Moments Estimation of Markov Models of Asset Prices," Econometrica, Econometric Society, vol. 61(4), pages 929-952, July.
- Darrell Duffie & Kenneth J. Singleton, 1990. "Simulated Moments Estimation of Markov Models of Asset Prices," NBER Technical Working Papers 0087, National Bureau of Economic Research, Inc.
- Marc Chesney & Robert J. Elliott & Dilip Madan & Hailiang Yang, 1993. "Diffusion Coefficient Estimation and Asset Pricing When Risk Premia and Sensitivities Are Time Varying," Mathematical Finance, Wiley Blackwell, vol. 3(2), pages 85-99.
- David Heath & Robert Jarrow & Andrew Morton, 2008. "Bond Pricing And The Term Structure Of Interest Rates: A New Methodology For Contingent Claims Valuation," World Scientific Book Chapters,in: Financial Derivatives Pricing Selected Works of Robert Jarrow, chapter 13, pages 277-305 World Scientific Publishing Co. Pte. Ltd..
- Heath, David & Jarrow, Robert & Morton, Andrew, 1992. "Bond Pricing and the Term Structure of Interest Rates: A New Methodology for Contingent Claims Valuation," Econometrica, Econometric Society, vol. 60(1), pages 77-105, January.
- Ernst R. Berndt & Bronwyn H. Hall & Robert E. Hall & Jerry A. Hausman, 1974. "Estimation and Inference in Nonlinear Structural Models," NBER Chapters,in: Annals of Economic and Social Measurement, Volume 3, number 4, pages 653-665 National Bureau of Economic Research, Inc.
- Schwartz, Eduardo S & Torous, Walter N, 1989. " Prepayment and the Valuation of Mortgage-Backed Securities," Journal of Finance, American Finance Association, vol. 44(2), pages 375-392, June. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:uts:wpaper:56. 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: (Duncan Ford)
If references are entirely missing, you can add them using this form.