Modeling the Dynamics of Shanghai Interbank Offered Rate Based on Single-Factor Short Rate Processes

Xili Zhang

Mathematical Problems in Engineering, 2014, vol. 2014, 1-12

Abstract:

Using the Shanghai Interbank Offered Rate data of overnight, 1 week, 2 week and 1 month, this paper provides a comparative analysis of some popular one-factor short rate models, including the Merton model, the geometric Brownian model, the Vasicek model, the Cox-Ingersoll-Ross model, and the mean-reversion jump-diffusion model. The parameter estimation and the model selection of these single-factor short interest rate models are investigated. We document that the most successful model in capturing the Shanghai Interbank Offered Rate is the mean-reversion jump-diffusion model.

Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:hin:jnlmpe:540803

DOI: 10.1155/2014/540803

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