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Continuous Time Models of Interest Rate: Testing Peso-Dollar Exchange Rate

Author

Listed:
  • José Antonio Núñez.

    (Instituto Tecnológico y de Estudios Superiores de Monterrey, México.)

  • Elizabeth Ortega.

    (Instituto Tecnológico y de Estudios Superiores de Monterrey, México.)

Abstract

As an extension of the article by Núñez, De la Cruz and Ortega (2007), different parametric models with jumps are tested with the methodology developed by Ait-Sahalia and Peng (2006), based on the transition function. Data analyzed are the peso-dollar exchange rate. The idea is to implement continuous-time parametric models to the pesodollar exchange rate. The results confirm that no continuous time model are not accurate enough to explain the behavior that describes the peso-dollar exchange rate, however, considering some continuous time models with Poisson jumps is possible to describe such behavior.

Suggested Citation

  • José Antonio Núñez. & Elizabeth Ortega., 2011. "Continuous Time Models of Interest Rate: Testing Peso-Dollar Exchange Rate," Economía: teoría y práctica, Universidad Autónoma Metropolitana, México, vol. 34(1), pages 43-63, Enero-Jun.
    • Handle: RePEc:ety:journl:v:34:y:2011:i:1:p:43-63
    DOI: 10.24275/ETYPUAM/NE/342011/Nunez
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    exchange rate; jumps; transition density.;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services

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