Publication Type
Working Paper
Publication Date
7-2001
Abstract
This paper proposes a Gaussian estimator for nonlinear continuous time models of the short term interest rate. The approach is based on a stopping time argument that produces a normalizing transformation facilitating the use of a Gaussian likelihood. A Monte Carlo study shows that the finite sample performance of the proposed procedure offers an improvement over the discrete approximation method proposed by Nowman (1997). An empirical application to U.S. and British interest rates is given.
Keywords
Gaussian Estimation, Nonlinear Diffusion, Normalizing Transformation
Discipline
Econometrics | Finance
Research Areas
Econometrics
Publisher
SSRN
Citation
YU, Jun and PHILLIPS, Peter C. B..
Gaussian estimation of continuous time models of the short term interest rate. (2001). Research Collection School Of Economics.
Available at: https://ink.library.smu.edu.sg/soe_research/2114
Creative Commons License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.
Additional URL
https://ssrn.com/abstract=278539