The Role of the Risk-Neutral Jump Size Distribution in Single-Factor Interest Rate Models

L. Gómez-Valle and J. Martínez-Rodríguez

Abstract and Applied Analysis, 2015, vol. 2015, 1-8

Abstract:

We obtain a result that relates the risk-neutral jump size of interest rates with yield curve data. This function is unobservable; therefore, this result opens a way to estimate the jump size directly from data in the markets together with the risk-neutral drift and jump intensity estimations. Then, we investigate the finite sample performance of this approach with a test problem. Moreover, we analyze the effect of estimating the risk-neutral jump size instead of assuming that it is artificially absorbed by the jump intensity, as usual in the interest rate literature. Finally, an application to US Treasury Bill data is also illustrated.

Date: 2015
References: Add references at CitEc
Citations:

Downloads: (external link)
http://downloads.hindawi.com/journals/AAA/2015/805695.pdf (application/pdf)
http://downloads.hindawi.com/journals/AAA/2015/805695.xml (text/xml)

Related works:
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: https://EconPapers.repec.org/RePEc:hin:jnlaaa:805695

DOI: 10.1155/2015/805695

Access Statistics for this article

More articles in Abstract and Applied Analysis from Hindawi
Bibliographic data for series maintained by Mohamed Abdelhakeem ().