Estimating the Parameters of the Stochastic Volatility Model of the Short-term Interest Rate

• 발행기관: 한국자료분석학회
• 저자명: Bongju Song
• 간행물 정보: 『Journal of The Korean Data Analysis Society (JKDAS)』Vol.19 No.6, 2921~2932쪽, 전체 12쪽
• 주제분류: 자연과학 > 통계학
• 파일형태: PDF
• 발행일자: 2017.12.31

영문 초록

Short-term interest rates are crucially important in the financial market. Financial market models are suggested in continuous time framework. We suppose the short-term interest rates to follow a diffusion model in continuous time. The diffusion model is described by the drift term and the diffusion term. There are many methods to estimate parameters of diffusion model. In this paper, we focus on a two-stage estimation method. Park (2008) suggests MGE (the Martingale method) to estimate the parameters of the drift term. We apply the two-stage estimation method for the stochastic volatility model. At first, we employ the Martingale method to estimate parameters of the drift term. Second, we try to estimate the rest of the parameters using the density-based filtering. Furthermore, we compare the results of our method with those of the existing method based on the simulation study and the empirical study. Our results show that the new estimation method by using the Martingale method and the density-based filtering is useful to estimate the parameters of the stochastic volatility model of the interest rate.

목차

1. Introduction

2. Literature review

3. Methodology

4. Simulation study

5. Empirical application

6. Conclusion

키워드

short-term interest rates diffusion model the Martingale method the density-based filtering stochastic volatility model