The Volatility of Short-Term Interest Rates : An Empirical Comparison of Alternative Models of the Term Structure of Interest Rates *

@inproceedings{Chan2000TheVO,
  title={The Volatility of Short-Term Interest Rates : An Empirical Comparison of Alternative Models of the Term Structure of Interest Rates *},
  author={K. Caleb Chan and G. Andrew Karolyi and Francis A. Longstaff and Anthony B. Sanders},
  year={2000}
}
We estimate and compare a variety of continuous-time models of the short-term riskless rate using the generalised method of moments. We find that the most successful models in capturing the dynamics of the short-term interest rate are those that allow the volatility of interest rate changes to be highly sensitive to the level of the riskless rate. A number of well-known models perform poorly in the comparisons because of their implicit restrictions on term structure volatility. We show that… CONTINUE READING

From This Paper

Figures, tables, and topics from this paper.
25 Citations
35 References
Similar Papers

Citations

Publications citing this paper.
Showing 1-10 of 25 extracted citations

References

Publications referenced by this paper.
Showing 1-10 of 35 references

Rates: A Comparison of Alternative Term Structure Models

  • G. M. Constantinides, J. E. Ingersoll
  • Short Term Interest Rates Since October
  • 1984
Highly Influential
6 Excerpts

Stochastic Processes for Interest Rates and Equilibrium Bond Prices

  • T. A. Finance. Marsh, E. R. Rosenfeld
  • General Equilibrium Model”, forthcoming,
  • 1983
Highly Influential
4 Excerpts

Large Sample Properties of Generalized Method of Moments Estimators

  • L. P. Hansen
  • 1982
Highly Influential
6 Excerpts

The Pricing of Options on Default-Free Bonds

  • G. Courtadon
  • Financial Economics
  • 1982
Highly Influential
4 Excerpts

The Pricing of Options and Corporate Liabilities

  • F. Black, M. Scholes
  • Analysts Journal,
  • 1973
Highly Influential
4 Excerpts

Pricing Interest-Rate Derivative Securities

  • J. Hull, A. White
  • Review of Financial Studies
  • 1990
Highly Influential
5 Excerpts

Temporal Aggregation and the Continuous-Time Capital Asset Pricing Model

  • F. A. Longstaff
  • Journal of Finance
  • 1989
Highly Influential
5 Excerpts

Distribution of the Estimators for Autoregressive Time Series with a Unit Root

  • D. A. Dickey, W. A. Fuller
  • Journal of the American Statistical Association
  • 1979
Highly Influential
3 Excerpts

Savings Bonds, Retractable Bonds, and Callable Bonds

  • M. J. Brennan, E. S. Schwartz
  • Journal of Financial Economics
  • 1977
Highly Influential
4 Excerpts

Similar Papers

Loading similar papers…