Exploration of the Brazilian Term Structure in a Hidden Markov Framework

Richard Munclinger

No 2011/022, IMF Working Papers from International Monetary Fund

Abstract: We apply a hidden Markov model of the term structure to modeling the Brazilian swap rate curve. We examine the model's characteristics and its performance in describing the cross-sectional and time-series dynamics of the term structure. Two regimes are identified, a high level and a high volatility regime and a low level and low volatility regime. Both regimes are persistent and are explained by the level and the slope of the term structure. The model is estimated using a Bayesian MCM algorithm that produces consistent standard errors and a reliable method for testing the differences between the model parameters.

Keywords: WP; market price; time series; Term Structure; Hidden Markov Models; MCMC; ATSM; Brazil; volatility regime; Markov chain; State process; mean reversion; affine regime; state transition; Markov-switching models; Market risk; Yield curve; Time series analysis; Inflation (search for similar items in EconPapers)
Pages: 31
Date: 2011-01-01
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.imf.org/external/pubs/cat/longres.aspx?sk=24604 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:imf:imfwpa:2011/022

Ordering information: This working paper can be ordered from
http://www.imf.org/external/pubs/pubs/ord_info.htm

Access Statistics for this paper

More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC.
Bibliographic data for series maintained by Akshay Modi ().