Nonlinear Drift and Stochastic Volatility
Download or Read eBook Nonlinear Drift and Stochastic Volatility PDF written by Licheng Sun and published by . This book was released on 2002 with total page pages. Available in PDF, EPUB and Kindle.
Author | : Licheng Sun |
Publisher | : |
Total Pages | : |
Release | : 2002 |
ISBN-10 | : OCLC:1291252406 |
ISBN-13 | : |
Rating | : 4/5 (06 Downloads) |
Book Synopsis Nonlinear Drift and Stochastic Volatility by : Licheng Sun
Book excerpt: In this article I provide new evidence on the role of nonlinear drift and stochastic volatility in interest rate modeling. I compare various model specifications for the short-term interest rate using the data from five countries. I find that modeling the stochastic volatility in the short rate is far more important than specifying the shape of the drift function. The empirical support for nonlinear drift is weak with or without the stochastic volatility factor. Although a linear drift stochastic volatility model fits the international data well, I find that the level effect differs across countries.