The Stochastic Interest Rate Risk Measurement Based on Nonparametric Estimation Method

Jing-jing Li () and Bao-chen Yang
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Jing-jing Li: Tianjin University
Bao-chen Yang: Tianjin University

A chapter in Proceedings of 20th International Conference on Industrial Engineering and Engineering Management, 2013, pp 667-676 from Springer

Abstract: Abstract There are many different types of the term structure of interest rate. The estimation methods of these models are usually complex. These problems increase the use-cost of the stochastic interest rate risk measurement and reduce the practicability, correctness and stability of immunization performance. Under Heath–Jarrow-Morton framework, we use nonparametric method to estimate the stochastic durations in order to reduce the influence of model specification error. The nonparametric estimation improves the immunization efficiency of the stochastic duration-matching method. The empirical results show that the method proposed in this paper has more accuracy immunization effect to the interest rate risk.

Keywords: Immunization; Interest rate risk; Nonparametric estimation; Stochastic duration (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-642-40072-8_67

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DOI: 10.1007/978-3-642-40072-8_67

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