An Empirical Study on Term Structure Models
(2012) NEKP01 20122Department of Economics
- Abstract
- The purpose of this paper is to test for the goodness-of-fit of the term structure models for the short-term interest rate in Sweden. The study period ranges from February 1, 2002 to March 31, 2012. The maximum likelihood method is used to estimate the models and the likelihood ratio test is applied to perform a comparison among the models. The implication of empirical results can be summarized as four issues: Firstly, the volatility of the short-term interest rate in Sweden follows a GARCH process. Secondly, the interest rate might evolve according to a non-mean-reverting process. Thirdly, the volatility of Swedish short-term interest rate is not heavily dependent of the level of current interest rate. Finally, only the models that allows... (More)
- The purpose of this paper is to test for the goodness-of-fit of the term structure models for the short-term interest rate in Sweden. The study period ranges from February 1, 2002 to March 31, 2012. The maximum likelihood method is used to estimate the models and the likelihood ratio test is applied to perform a comparison among the models. The implication of empirical results can be summarized as four issues: Firstly, the volatility of the short-term interest rate in Sweden follows a GARCH process. Secondly, the interest rate might evolve according to a non-mean-reverting process. Thirdly, the volatility of Swedish short-term interest rate is not heavily dependent of the level of current interest rate. Finally, only the models that allows for low-elastic volatility to the current rate can measure Swedish interest rate well. (Less)
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/3158276
- author
- Zhang, Lei LU
- supervisor
- organization
- alternative title
- Evidence from Sweden
- course
- NEKP01 20122
- year
- 2012
- type
- H2 - Master's Degree (Two Years)
- subject
- keywords
- Term Structure, Short-Term Interest Rates, Maximum Likelihood Estimation
- language
- English
- id
- 3158276
- date added to LUP
- 2012-11-29 14:03:25
- date last changed
- 2012-11-29 14:03:25
@misc{3158276, abstract = {{The purpose of this paper is to test for the goodness-of-fit of the term structure models for the short-term interest rate in Sweden. The study period ranges from February 1, 2002 to March 31, 2012. The maximum likelihood method is used to estimate the models and the likelihood ratio test is applied to perform a comparison among the models. The implication of empirical results can be summarized as four issues: Firstly, the volatility of the short-term interest rate in Sweden follows a GARCH process. Secondly, the interest rate might evolve according to a non-mean-reverting process. Thirdly, the volatility of Swedish short-term interest rate is not heavily dependent of the level of current interest rate. Finally, only the models that allows for low-elastic volatility to the current rate can measure Swedish interest rate well.}}, author = {{Zhang, Lei}}, language = {{eng}}, note = {{Student Paper}}, title = {{An Empirical Study on Term Structure Models}}, year = {{2012}}, }