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

Dominique Guegan () 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
Florian Ielpo: CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique

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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: Fed Funds futures contracts; Subjective distribution; autoregressive conditional density; generalized hyperbolic distribution; Distribution subjective; distribution conditionnelle autoregressive; distribution hyperbolique généralisée; futures Fed Funds (search for similar items in EconPapers)
Date: 2007-10
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00188247
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Published in 2007

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