A New Numerical Approa for Fitting the Initlal Yield Curve

Uhrig, Marliese; Walter, Ulrich

doi:10.3905/jfi.1996.408155

Cited by 18 publications

(3 citation statements)

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“…Table 6 summarizes the parameter estimates for the risk-free Vasicek and CIR short-rate process derived from German term structure observations. The estimates of the reversion-speed parameter K~ are positive as expected for a non-explosive model but lower compared to other studies (e.g., Duffee, 1999, or Uhrig & Walter, 1996. This can be explained by the overall increasing shape of the German term structure in our sample period which does not encompass a full business cycle.…”

Section: Results For Affine Modelscontrasting

confidence: 69%

Credit Spreads Between German and Italian Sovereign Bonds - Do One-Factor Affine Models Work?

Duellmann

Windfuhr²

2001

SSRN Journal

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Section: Results For Affine Modelscontrasting

confidence: 69%

Credit Spreads Between German and Italian Sovereign Bonds - Do One-Factor Affine Models Work?

Duellmann

Windfuhr²

2001

SSRN Journal

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“…The data are the average across different brokers of mid-market volatility quotes at 5 p.m. for at-the-money caps and of mid-market swap rates, with maturities of one, two, three, four, five, seven, and ten years (fourteen data points per day). Similar results are found by Chan et al [1992] and Nowman [1997] for U.S. one-month Treasury bill yields, and by Uhrig and Walter [1996] for German money market rates. The sample period is the same as that of the MIBOR.…”

Section: Estimation and Implementation Of The Modelssupporting

confidence: 83%

Consistent versus Non-Consistent Term Structure Models

Navas¹

1999

JFI

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T here are many ways of modeling the term structure of interest rates, many interest rate models, and many classifications of them. Some models describe the evolution of a given interest rate (usually the short-term rate) and will be consistent by construction with the current value of that interest rate. These models, in general, will not be consistent with the rest of the yield curve, however, and will not "correctly" price (relative to the market) claims as simple as discount bonds; this suggests that the models will do a poor job pricing more complex derivatives. Some of these models use one factor to explain the evolution of interest rates (see, for example, Vasicek [1977] and Cox, Ingersoll, and Ross [1985]), while others employ two factors (Brennan and Schwartz [1979], Schaefer and Schwartz [1984], Longstaff and Schwartz [1992], and Moreno [1996], among others).From the perspective of derivatives pricing, it seems more convenient to develop models consistent with the market yield curve. This is the approach followed by Ho and Lee [1986] (using bond prices) and Heath, Jarrow, and Morton [1992] (using forward interest rates). An equivalent approach is to build models based on the evolution of the short rate (or a function of it), and allow for time-dependent parameters (see Dybvig [1988] and Jamshidian [1988]). These parameters can be calibrated so that (524 observations). The continuous-time unrestricted model is dr = κ(θ -r)dt + σr δ dz. t-statistics in parentheses.

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“…Thus we use the Brennan and Schwartz (1980) one-factor interest rate model, which belongs to the family of models given by dr = α(µ r − r)dt + r γ σ r dZ r . Our choice of γ = 1 can be justified by the empirical evidence of Chan et al (1992), Uhrig and Walter (1996), and Navas (1999), whose estimates of γ are 0.77, 1.50, and 1.77 for the German, U.S., and Spanish market, respectively.…”

Section: The Modelmentioning

confidence: 99%

Pricing LYONs under Stochastic Interest Rates

Navas

2001

SSRN Journal

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A New Numerical Approa for Fitting the Initlal Yield Curve

Cited by 18 publications

References 0 publications

Credit Spreads Between German and Italian Sovereign Bonds - Do One-Factor Affine Models Work?

Credit Spreads Between German and Italian Sovereign Bonds - Do One-Factor Affine Models Work?

Consistent versus Non-Consistent Term Structure Models

Pricing LYONs under Stochastic Interest Rates

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