IDENTIFICATION OF AFFINE TERM STRUCTURES FROM YIELD CURVE DATA

We consider a slight perturbation of the Hull-White short rate model and the resulting modified forward rate equation. We identify the model coefficients by using the martingale property of the normalized bond price. The forward rate and the system parameters are then estimated by using the maximum...

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Bibliographic Details
Published inInternational Journal of Theoretical and Applied Finance (IJTAF) Vol. 13; no. 2; pp. 259 - 283
Main Authors Bagchi, Arunabha, Aihara, Shin Ichi
Format Journal Article
LanguageEnglish
Published World Scientific Publishing Co. Pte. Ltd 01.03.2010
SeriesInternational Journal of Theoretical and Applied Finance (IJTAF)
Subjects
affine term structure
forward curves
Interest rate models
Kalman filter
MLE
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Summary:We consider a slight perturbation of the Hull-White short rate model and the resulting modified forward rate equation. We identify the model coefficients by using the martingale property of the normalized bond price. The forward rate and the system parameters are then estimated by using the maximum likelihood method.
ISSN:1793-6322
DOI:10.1142/S0219024910005760