Publication Type
Journal Article
Version
publishedVersion
Publication Date
2-2011
Abstract
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.
Keywords
Nonlinear Diffusion, Normalizing Transformation, Level Effect, DDS Theorem.
Discipline
Econometrics | Economic Theory | Finance
Research Areas
Econometrics
Publication
Econometrics Journal
Volume
14
Issue
1
First Page
126
Last Page
129
ISSN
1368-4221
Identifier
10.1111/j.1368-423X.2010.00326.x
Publisher
Wiley
City or Country
Singapore
Citation
PHILLIPS, Peter C. B. and YU, Jun.
Corrigendum to "A Gaussian Approach for Continuous Time Models of the Short Term Interest Rate". (2011). Econometrics Journal. 14, (1), 126-129.
Available at: https://ink.library.smu.edu.sg/soe_research/1237
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.1111/j.1368-423X.2010.00326.x