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Gaussian estimation and forecasting of multi-factor term structure models with an application to Japan and the United Kingdom

Nowman, K. Ben (2001) Gaussian estimation and forecasting of multi-factor term structure models with an application to Japan and the United Kingdom. Asia-Pacific Financial Markets, 8 (1). pp. 23-34. ISSN 1387-2834

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Official URL: http://dx.doi.org/10.1023/A:1011436907037

Abstract

In this paper we extend the exact discrete model of Bergstrom (1966) first used in empirical finance by Brennan and Schwartz (1979) to estimate their two-factor term structure model to estimate other two-factor term structure models using the recent assumption in Nowman (1997) for single factor models. Following Nowman (1997) we use the exact Gaussian estimation methods of Bergstrom (1983–1986, 1990) to estimate two-factor CKLS, Vasicek and CIR models. We estimate the models using monthly UK and Japanese interest rate data and our results indicate that the estimation method works well in practice.

Item Type:Article
Additional Information:Online ISSN 1573-6946
Research Community:University of Westminster > Westminster Business School
ID Code:749
Deposited On:21 Sep 2005
Last Modified:13 Oct 2009 16:06

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