Flexible time series models for subjective distribution estimation with monetary policy in view

Dominique Guegan (dominique.guegan@univ-paris1.fr) and Florian Ielpo
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Dominique Guegan: CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement

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Abstract: In this paper, we introduce a new approach to estimate the subjective distribution of the future short rate from the historical dynamics of futures, based on a model generated by a Normal Inverse Gaussian distribution, with dynamical parameters. The model displays time varying conditional volatility, skewness and kurtosis and provides a flexible framework to recover the conditional distribution of the future rates. For the estimation, we use maximum likelihood method. Then, we apply the model to Fed Fund futures and discuss its performance.

Keywords: Subjective distribution; autoregressive conditional density; generalized hyperbolic distribution; Fed Funds futures contracts (search for similar items in EconPapers)
Date: 2008
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00368356v1
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Citations: View citations in EconPapers (2)

Published in Brussels Economic Review , 2008, 51 (1), pp.79-103

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Journal Article: Flexible time series models for subjective distribution estimation with monetary policy in view (2008)
Working Paper: Flexible time series models for subjective distribution estimation with monetary policy in view (2007)
Working Paper: Flexible time series models for subjective distribution estimation with monetary policy in view (2007)
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