Continuous time modeling of interest, rates : an empirical study on the Turkish short rate

• Autorzy: Seleuk Bayraci , Unal Gazanfer
• Języki publikacji: EN

Abstrakty

EN

We proposed a continuous lime ARMA known as CARMA(p.q) model for modeling the interest rate dynamics. CARMA(p.q) models have an advantage over their discrete time counterparts that they allow using Ito formulas and provide closed-form solutions for bond and bond option prices. Wc demonstrate the capabilities of CARMA(p,q) models by using Turkish short rate. The Turkish Republic Central Hank's benchmark bond prices are used to calculate short-term interest rates between the period of 15.07.2006 and 15.07.2008. ARMA(1,1) model and CARMA(l,0) model are chosen as best suitable models in modeling the Turkish short rate.

Słowa kluczowe

EN

Finance; Central banks; Econometric models

PL

Finanse; Banki centralne; Modele ekonometryczne

• Czasopismo: Scientific Publications / University of Economics in Katowice
• Rocznik: 2012
• Tom: Mathematical, econometrical and computer methods In finance and insurance 2010
• Strony: 9--15

Twórcy

autor

Seleuk Bayraci

• Yeditepe University, Turkey

autor

Unal Gazanfer

• Yeditepe University, Turkey

Bibliografia

• Ait-Sahalia Y., Testing Continuous Time Models of the Spot Interest Rates, "Review of Financial Studie" 1996, 9. 385-426
• Ait-Sahalia Y., Transition Densities for Interest Rate and Other Nonlinear Diffusions. "Journal of Finance" 1999. 54, 1361-1395
• Andersen T.G., Lund J., Estimating Continuous Time Stochastic Volatility Models of the Short-Term Interest Rate, "Journal of Oconomctrics" 1997. 77. 343-377
• BcnthE.B., Benth J.B., Koekebakker S. "Stochastic Modelling of Electricity and Related Markets. World Scientific", Singapore 2008
• Brockwell P.J., Continuous-Time ARM A Processes, [in:] Rao C.R. and Shanbhag D.N. |ed.]. Stochastic Processes: Theory and Methods. "Handbook of Statistics", 2000. 19, 249-276
• Brockwell P.J.. Levy-Driven CARMA Processes. "Annals of the Institute of Statistical Mathematics" 2001,53, 113-124
• Chan K.C., Karolyi G.A., Longstaff F.A., Sanders A.B., An Empirical Comparison of Alternative Models of the Short-Term Interest Rate, "Journal of Finance", 1992, 47. 1209-1227
• Chapman D.A., Pearson N.D., Is the Short Rate Drift Actually Nonlinear?. "Journal of finance" 2000, 55,35-388"Gray S.F. Modeling the Conditional Distribution of interest Rates as a Regime-Switching Process, "Journal of Financial Economics" 1996. 42, 27-62
• Hong Y., Li H., Zhao F. "Out of Sample Performance of Discrele-Time Spot Interest Rate Models. "Journal of Business and Economic Statistics",2004. 22. 457-474
• Pritsker M., Nonparametric Density Estimation and Tests of Continuous Time Interest Rate Models. "Review of Financial Studies" 1998, 11. 449-487
• Stanton R., A Nonparametric Model of Term Structure Dynamics and the Market Price of Interest Rate Risk. "Journal of Finance" 1997, 52, 1973-2002