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Are levels effects important in out-of-sample performance of short rate models?

Sandy Suardi ()

Economics Letters, 2008, vol. 99, issue 1, 181-184

Abstract: This paper derives short-term interest rate volatility forecasts from various interest rate models. While models that specify both GARCH and levels effects are superior in their forecasts accuracy, they systematically under predict interest rate volatility more frequently than simple short rate models.

Date: 2008
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Handle: RePEc:eee:ecolet:v:99:y:2008:i:1:p:181-184