Diffusion Estimation and Structural Stability Tests of Short Term Interest Rate Models

2003 ◽  
Author(s):  
Sumihiro Takeda
Keyword(s):  
Interest Rate ◽  
Structural Stability ◽  
Short Term ◽  
Interest Rate Models ◽  
Stability Tests

Bayesian testing for short term interest rate models

2017 ◽  
Vol 20 ◽  
pp. 146-152 ◽  
Author(s):  
Yonghui Zhang ◽  
Zhongtian Chen ◽  
Yong Li
Keyword(s):  
Interest Rate ◽  
Short Term ◽  
Interest Rate Models ◽  
Bayesian Testing

scholarly journals Arbitrage with Fixed Costs and Interest Rate Models

2006 ◽  
Vol 41 (4) ◽  
pp. 889-913 ◽  
Author(s):  
Elyès Jouini ◽  
Clotilde Napp
Keyword(s):  
Interest Rate ◽  
Securities Market ◽  
Fixed Costs ◽  
Short Term ◽  
Interest Rate Models ◽  
Striking Result ◽  
Arbitrage Opportunities ◽  
Pricing Rules ◽  
Absence Of Arbitrage

AbstractWe study securities market models with fixed costs. We first characterize the absence of arbitrage opportunities and provide fair pricing rules. We then apply these results to extend some popular interest rate and option pricing models that present arbitrage opportunities in the absence of fixed costs. In particular, we prove that the quite striking result obtained by Dybvig, Ingersoll, and Ross (1996), which asserts that under the assumption of absence of arbitrage long zero-coupon rates can never fall, is no longer true in models with fixed costs, even arbitrarily small fixed costs. For instance, models in which the long-term rate follows a diffusion process are arbitrage-free in the presence of fixed costs (including arbitrarily small fixed costs). We also rationalize models with partially absorbing or reflecting barriers on the price processes. We propose a version of the Cox, Ingersoll, and Ross (1985) model which, consistent with Longstaff (1992), produces yield curves with realistic humps, but does not assume an absorbing barrier for the short-term rate. This is made possible by the presence of (even arbitrarily small) fixed costs.

On the robustness of short–term interest rate models

2003 ◽  
Vol 43 (1) ◽  
pp. 87-121 ◽  
Author(s):  
Sirimon Treepongkaruna ◽  
Stephen Gray
Keyword(s):  
Interest Rate ◽  
Short Term ◽  
Interest Rate Models
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