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Gaussian estimation of continuous time diffusions of UK interest rates

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  • Nowman, K. Ben

Abstract

This paper estimates stochastic differential equation models for the interest rate dynamics of the United Kingdom bond market using Gaussian estimation econometric methods and monthly data over the period 1970–2010 using a range of maturities. Gaussian estimates of single and two equation models indicate that there is a relationship between the level of rates and the volatility of rates across the maturities. In addition, there is some evidence of feedback effects.

Suggested Citation

  • Nowman, K. Ben, 2011. "Gaussian estimation of continuous time diffusions of UK interest rates," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 81(8), pages 1618-1624.
    • Handle: RePEc:eee:matcom:v:81:y:2011:i:8:p:1618-1624
    DOI: 10.1016/j.matcom.2010.12.001
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    References listed on IDEAS

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