Indirect robust estimation of the short-term interest rate process

Veronika Czellar (), G. Karolyi and Elvezio Ronchetti
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Veronika Czellar: GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - HEC Paris - Ecole des Hautes Etudes Commerciales - CNRS - Centre National de la Recherche Scientifique

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Abstract: We propose Indirect Robust Generalized Method of Moments (IRGMM), a simulation-based estimation methodology, to model short-term interest rate processes. The primary advantage of IRGMM relative to classical estimators of the continuous-time short-rate diffusion processes is that it corrects both the errors due to discretization and the errors due to model misspecification. We apply this approach to monthly US risk free rates and to various monthly Eurocurrency rates and provide extensive evidence of its predictive performances in a variety of settings.

Keywords: GMM and RGMM estimators; Indirect inference (search for similar items in EconPapers)
Date: 2007-09
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Citations: View citations in EconPapers (17)

Published in Journal of Empirical Finance, 2007, Vol.14, n°4, pp.546-563. ⟨10.1016/j.jempfin.2006.09.004⟩

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Related works:
Journal Article: Indirect robust estimation of the short-term interest rate process (2007)
Working Paper: Indirect Robust Estimation of the Short-term Interest Rate Process (2005)
Working Paper: Indirect Robust Estimation of the Short-term interest Rate Process (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-00463251

DOI: 10.1016/j.jempfin.2006.09.004

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