 Itô Conditional Moment Generator and the Estimation of Short-Rate ProcessesJournal of Financial Econometrics, 2003, vol. 1, issue 2, 250-271 Abstract: This article exploits the Itô's formula to derive the conditional moments vector for the class of interest rate models that allow for nonlinear volatility and flexible jump specifications. Such a characterization of continuous-time processes by the Itô conditional moment generator noticeably enlarges the admissible set beyond the affine jump-diffusion class. A simple generalized method of moments (GMM) estimator can be constructed based on the analytical solution to the lower-order moments, with natural diagnostics of the conditional mean, variance, skewness, and kurtosis. Monte Carlo evidence suggests that the proposed estimator has desirable finite sample properties relative to the asymptotically efficient maximum- likelihood estimator (MLE). The empirical application singles out the nonlinear quadratic variance as the key feature of the U.S. short-rate dynamics. , . Date: 2003 There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:oup:jfinec:v:1:y:2003:i:2:p:250-271 Ordering information: This journal article can be ordered from Access Statistics for this article Journal of Financial Econometrics is currently edited by Allan Timmermann and Fabio Trojani More articles in Journal of Financial Econometrics from Oxford University Press Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK. Contact information at EDIRC. |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.