Multiregime Term Structure Models

Christian Gourieroux and Olivier Scaillet

No 1998002, LIDAM Discussion Papers IRES from Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES)

Abstract: The Ho and Lee model is the analogue for the study of the term structure of interest rates of the binomial tree introduced by Cox, Ross and Rubinstein in the one risky asset case. This model allows only for a small number of deformations of the term structure between two successive dates, and is therefore incompatible with available data. We propose here to reconcile tree approaches and statistical inference. We consider regime models for which the deformation of the term structure may behave randomly in each regime. Questions about constraints induced by no arbitrage are also addressed in a context of asymmetric information between traders and the econometrician in charge with the estimation.

Keywords: binomial model; term structure; interest rate; asymmetric information (search for similar items in EconPapers)
JEL-codes: C4 G13 (search for similar items in EconPapers)
Pages: 28
Date: 1997-03-01, Revised 1997-12
New Economics Papers: this item is included in nep-cba and nep-fmk
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Citations: View citations in EconPapers (2)

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Working Paper: Multiregime Term Structure Models (1997)
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Persistent link: https://EconPapers.repec.org/RePEc:ctl:louvir:1998002

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