Calibration of Interest Rate Models - Transition Market Case

Martin Vojtek ()

Finance from EconWPA

Abstract: A methodology to calibrate multifactor interest rate model for transition countries is proposed. The usual methodology of calibration with implied volatility cannot be used as there are no markets for regularly traded derivatives. The existence of such a markets is essential for this calibration. The paradigm used is the Brace-Gatarek- Musiela model of interest rates (Brace, Gatarek and Musiela (1997)), which models the evolution of LIBOR (London InterBank Offered Rate) market interest rates, together with the Orthogonal GARCH model proposed by Alexander (2002), and further generalized by van der Weide (2002). The estimated model is used for the analysis of interest rate markets with shorter-end maturities in the 4 Visegrad countries (Slovak Republic, Czech Republic, Poland and Hungary).

Keywords: Interest rate; Interest rate models, Calibration, Transition countries (search for similar items in EconPapers)
JEL-codes: C13 C32 C82 E43 G14 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-fin and nep-mac
Date: 2004-10-26
Note: Type of Document - pdf; pages: 50
View list of references

Downloads: (external link)
http://129.3.20.41/eps/fin/papers/0410/0410015.pdf (application/pdf)

Related works:
Working Paper: Calibration of Interest Rate Models - Transition Market Case (2004)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpfi:0410015

Access Statistics for this paper

More papers in Finance from EconWPA
Series data maintained by EconWPA ().