Abstract

http://ssrn.com/abstract=247207
 
 

References (36)



 
 

Citations (39)



 


 



Short Rate Nonlinearities and Regime Switches


Geert Bekaert


Columbia Business School - Finance and Economics; National Bureau of Economic Research (NBER)

Andrew Ang


Columbia Business School - Finance and Economics; National Bureau of Economic Research (NBER)

October 23, 2000


Abstract:     
Using non-parametric estimation methods, various authors have shown distinct non-linearities in the drift and volatility function of the US short rate, which are inconsistent with standard affine term structure models. We document how a regime-switching model with state dependent transition probabilities between regimes can replicate the patterns found by the non-parametric studies. To do so, we use data from the UK and Germany in addition to US data and include term spreads in some of our models. We also examine the drift and volatility function of the term spread.

Number of Pages in PDF File: 37

Keywords: Short rate, term spread, drift, volatility, regime-switching

JEL Classification: C22, C32, E43, G12

working papers series


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Date posted: December 8, 2000  

Suggested Citation

Bekaert, Geert and Ang, Andrew, Short Rate Nonlinearities and Regime Switches (October 23, 2000). Available at SSRN: http://ssrn.com/abstract=247207 or http://dx.doi.org/10.2139/ssrn.247207

Contact Information

Geert Bekaert
Columbia Business School - Finance and Economics ( email )
3022 Broadway
New York, NY 10027
United States

National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Andrew Ang (Contact Author)
Columbia Business School - Finance and Economics ( email )
3022 Broadway
New York, NY 10027
United States

National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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