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Volatility Estimates of the Short-Term Interest Rate with an Application to German Data

Volatility Estimates of the Short-Term Interest Rate with an Application to German Data
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Year:    2000

Author:    Dankenbring, Henning

Credit and Capital Markets – Kredit und Kapital, Vol. 33 (2000), Iss. 4 : pp. 548–570

Abstract

This paper proposes a procedure for testing alternative specifications of the short-term interest rate’s dynamics which takes into account the non-stationarity of the interest rate process for certain restrictions, i.e. the traditional test statistic has a non-standard distribution. Moreover, we do not take the specification of the mean equation as given by the theory but rather base the choice of the lag structure on a robust Lagrange Multiplier test. In contrast to U.S. data we find that the volatility depends either on the interest rate level or on information shocks but not on both. Finally, we propose to describe the short-term interest rate’s dynamics by means of an AR(1) model with stochastic volatility. (JEL C2, E4, G1)

Journal Article Details

Publisher Name:    Global Science Press

Language:    Multiple languages

DOI:    https://doi.org/10.3790/ccm.33.4.548

Credit and Capital Markets – Kredit und Kapital, Vol. 33 (2000), Iss. 4 : pp. 548–570

Published online:    2000-04

AMS Subject Headings:    Duncker & Humblot

Copyright:    COPYRIGHT: © Global Science Press

Pages:    23

Author Details

Dankenbring, Henning

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Section Title Page Action Price
Henning Dankenbring: Volatility Estimates of the Short-Term Interest\rRate with an Application to German Data 548
I. Introduction 548
II. Theory and Econometric Methodology 550
1. One-Factor Zero Curve Arbitrage Models 550
2. Econometric Methodology 554
3. The Data 556
III. Model Estimations 559
IV. Summary and Conclusion 567
References 567
Summary: Volatility Estimates of the Short-Term Interest Rate with an Application to German Data 569
Zusammenfassung: Schätzungen von Volatilitätsfunktionen\rdes kurzfristigen Zinssatzes unter\rVerwendung von deutschen Daten 569
Résumé: Evaluations des fonctions de volatilité du taux d'intérêt à court terme à l'aide de données allemandes 570