 A STATE‐SPACE APPROACH TO ESTIMATE AND TEST MULTIFACTOR COX‐INGERSOLL‐ROSS MODELS OF THE TERM STRUCTUREAlois L. J. Geyer and Stefan Pichler Journal of Financial Research, 1999, vol. 22, issue 1, 107-130 Abstract: The objective of this paper is to estimate and test multifactor versions of the Cox‐Ingersoll‐Ross (CIR) model of the nominal term structure of interest rates. The proposed state‐space approach integrates time series and cross‐sectional aspects of the CIR model, is consistent with the underlying economic model, and can use information from all available points of the term structure. We recover estimates of the underlying factors that are consistent with the assumptions about the stochastic processes and compare them with factors obtained from standard factor analysis. We perform thorough diagnostic checking and thereby provide new evidence regarding conclusions about the adequacy of the CIR model. We present empirical results for U.S. Treasury market data. Although the specification of multifactor CIR models is sufficiently flexible for the shape of the term structure, we find strong evidence against the adequacy of the CIR model. Date: 1999 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:bla:jfnres:v:22:y:1999:i:1:p:107-130 Ordering information: This journal article can be ordered from Access Statistics for this article Journal of Financial Research is currently edited by Jayant Kale and Gerald Gay More articles in Journal of Financial Research from Southern Finance Association Contact information at EDIRC., Southwestern Finance Association Contact information at EDIRC. |
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