Poisson-Guassian Processes and the Bond Markets
Sanjiv Das ()
No 6631, NBER Working Papers from National Bureau of Economic Research, Inc
That interest rates move in a discontinuous manner is no surprise to participants in the bond markets. This paper proposes and estimates a class of Poisson-Gaussian processes that allow for jumps in interest rates. Estimation is undertaken using exact continuous-time and discrete-time estimators. Analytical derivations of the characteristic functions, moments and density functions of jump-diffusion stochastic process are developed and employed in empirical estimation. These derivations are general enough to accommodate any jump distribution. We find that jump processes capture empirical features of the data which would not be captured by diffusion models. The models in the paper enable an assessment of the impact of Fed activity and day-of-week effects on the stochastic process for interest rates. There is strong evidence that existing diffusion models would be well-enhanced by jump processes.
New Economics Papers: this item is included in nep-ifn
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15) Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:6631
Ordering information: This working paper can be ordered from
Access Statistics for this paper
More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().