Abstract

http://ssrn.com/abstract=609382
 
 

References (49)



 
 

Citations (2)



 


 



Testing Models of the Spot Interest Rate Volatility


Miguel A. Ferreira


Nova School of Business and Economics; European Corporate Governance Institute (ECGI)

January 2002


Abstract:     
This paper estimates discrete-time stochastic volatility models of the short-term spot interest rate for Germany and France, 1981-1997. Stochastic volatility interest rate models with both news and square root level effects seem to dominate alternative specifications. We extend previous results by using an exponential functional form for volatility, which is able to mitigate the impact of very large realizations and yield a better fit. Interest rate volatility shows a less persistent behavior than in stock returns and US Treasury bill yields volatility. Positive innovations in interest rates have a greater impact on conditional volatility than negative innovations.

Number of Pages in PDF File: 54

Keywords: Interest rates, Stochastic volatility, GARCH

JEL Classification: C52, G12, E43

working papers series


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Date posted: October 27, 2004  

Suggested Citation

Ferreira, Miguel A., Testing Models of the Spot Interest Rate Volatility (January 2002). Available at SSRN: http://ssrn.com/abstract=609382 or http://dx.doi.org/10.2139/ssrn.609382

Contact Information

Miguel Almeida Ferreira (Contact Author)
Nova School of Business and Economics ( email )
Campus de Campolide
Lisbon, 1099-032
Portugal
European Corporate Governance Institute (ECGI) ( email )
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
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