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Detailed empirical study of the term structure of interest rates. Emergence of power laws and scaling laws

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  • Alderweireld, Thomas
  • Nuyts, Jean

Abstract

The technique of Padé approximants, introduced in a previous work, is applied to extended recent data on the distribution of variations of interest rates compiled by the Federal Reserve System in the US. It is shown that new power laws and new scaling laws emerge for any maturity not only as a function of the Lag but also as a function of the average inital rate. This is especially true for the one year maturity where critical forms and critical exponents are obtained. This suggests future work in the direction of constructing a theory of variations of interest rates at a more “microscopic” level.

Suggested Citation

  • Alderweireld, Thomas & Nuyts, Jean, 2004. "Detailed empirical study of the term structure of interest rates. Emergence of power laws and scaling laws," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 331(3), pages 602-616.
    • Handle: RePEc:eee:phsmap:v:331:y:2004:i:3:p:602-616
    DOI: 10.1016/j.physa.2003.09.038
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    References listed on IDEAS

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    1. Tiziana Di Matteo & Tomaso Aste, 2002. "How Does The Eurodollar Interest Rate Behave?," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 5(01), pages 107-122.
    2. J-P. Bouchaud, 2001. "Power laws in economics and finance: some ideas from physics," Quantitative Finance, Taylor & Francis Journals, vol. 1(1), pages 105-112.
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    Cited by:

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    2. Ting Ting Chen & Tetsuya Takaishi, 2013. "Empirical Study of the GARCH model with Rational Errors," Papers 1312.7057, arXiv.org.

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