Corrigendum to ‘A Gaussian approach for continuous time models of short-term interest rates’

Peter C. B. PHILLIPS, Singapore Management University
Jun YU, Singapore Management University


This note corrects an error in Yu and Phillips (2001, hereafter YP) where a time transformation was used to induce Gaussian disturbances in the discrete time version of a continuous time model. The error occurs in equations (3.7)–(3.10) of YP where the Dambis–Dubins–Schwarz (hereafter DDS) theorem was applied to the quadratic variation of the error term in equation (3.6), [M]h, in order to induce a sequence of stopping time points {tj} for which the disturbance term in (3.10) follows a normal distribution, facilitating Gaussian estimation.