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Nonparametric estimation of scalar diffusion models of interest rates using asymmetric kernels

Title:

Nonparametric estimation of scalar diffusion models of interest rates using asymmetric kernels

Gospodinov, Nikolay and Hirukawa, Masayuki (2012) Nonparametric estimation of scalar diffusion models of interest rates using asymmetric kernels. Journal of Empirical Finance, 19 (4). pp. 595-609. ISSN 09275398

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Official URL: http://dx.doi.org/10.1016/j.jempfin.2012.04.001

Abstract

This paper proposes an asymmetric kernel-based method for nonparametric estimation of scalar diffusion models of spot interest rates. We derive the asymptotic theory for the asymmetric kernel estimators of the drift and diffusion functions for general and positive recurrent processes and illustrate the advantages of the Gamma kernel for bias correction and efficiency gains. The finite-sample properties and the practical relevance of the proposed nonparametric estimators for bond and option pricing are evaluated using actual and simulated data for U.S. interest rates.

Divisions:Concordia University > Faculty of Arts and Science > Economics
Item Type:Article
Refereed:Yes
Authors:Gospodinov, Nikolay and Hirukawa, Masayuki
Journal or Publication:Journal of Empirical Finance
Date:2012
ID Code:974515
Deposited By:ANDREA MURRAY
Deposited On:02 Aug 2012 10:46
Last Modified:02 Aug 2012 10:46
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