The Volatility Structure of the Fixed Income Market under the HJM Framework: A Nonlinear Filtering Approach

Carl Chiarella () and Thuy-Duong To
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Thuy-Duong To: School of Banking and Finance, University of NSW

No 150, Research Paper Series from Quantitative Finance Research Centre, University of Technology, Sydney

Abstract: This paper seeks to estimate a multifactor volatility model so as to describe the dynamics of interest rate markets, using data from the highly liquid but short term futures markets. The difficult problem of estimating such multifactor models is resolved by using a genetic algorithm to carry out the optimization procedure. The ability to successfully estimate a multifactor volatility model also eliminates the need to include a jump component, the existence of which would create difficulties in the practical use of interest rate models, such as pricing options or producing forecasts.

Keywords: term structure; volatility; mutlifactor; jump; eurodollar futures; genetic algorithm (search for similar items in EconPapers)
JEL-codes: C51 C61 E43 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ets, nep-fin and nep-mac
Date: 2005-01-01
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http://www.business.uts.edu.au/qfrc/research/research_papers/rp150.pdf (application/pdf)

Related works:
Working Paper: The Volatility Structure of the Fixed Income Market under the HJM Framework: A Nonlinear Filtering Approach (2005)
Journal Article: The volatility structure of the fixed income market under the HJM framework: A nonlinear filtering approach (2009)
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Persistent link: http://EconPapers.repec.org/RePEc:uts:rpaper:150

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