Random field forward interest rate models, market price of risk and their statistics

Gáll, József and Pap, Gyula and Peeters, Willem (2007) Random field forward interest rate models, market price of risk and their statistics. Annali dell'Universita di Ferrara, 53 (2). pp. 233-242. ISSN 0430-3202

Text 1120290.pdf Restricted to Registered users only Download (178kB) | Request a copy

Abstract

In this paper we consider discrete time forward interest rate models. In our approach, unlike in the classical Heath-Jarrow-Morton framework, the forward rate curves are driven by a random field. Hence we get a general interest rate structure. Our aim is to give an overview of our results in such a model on the following questions: no-arbitrage conditions, maximum likelihood estimation of the volatility, as well as the joint estimation of the parameters and the asymptotic behaviour of the estimators, relationship with continuous models. Finally we give discussion on the practical problems of the estimation and we show several numerical results on the statistics of such models.

Actions (login required)

Edit Item