Further evidence on alternative continuous time models of the short-term interest rate
نویسنده
چکیده
This paper examines the stochastic behavior of the 1-month interbank rate in ten countries. Various one-factor models are estimated using an exact maximum likelihood estimator, which is based on the recently introduced Gaussian methodology. Interest rate volatility is found to be less sensitive to interest rate levels than stated in the literature. In addition, the constant elasticity variance (CEV) model is superior to other formulations in terms of data fit. © 2000 Elsevier Science B.V. All rights reserved.
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