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Identification Of Affine Term Structures From Yield Curve Data

Author

Listed:
  • SHIN ICHI AIHARA

    (Tokyo University of Science, Suwa, Toyohira 5000-1, Chino, Nagano, Japan)

  • ARUNABHA BAGCHI

    (FELab and Department of Applied Mathematics, University of Twente, P. O. Box 217, 7500AE Enschede, The Netherlands)

Abstract

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.

Suggested Citation

  • Shin Ichi Aihara & Arunabha Bagchi, 2010. "Identification Of Affine Term Structures From Yield Curve Data," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 13(02), pages 259-283.
    • Handle: RePEc:wsi:ijtafx:v:13:y:2010:i:02:n:s0219024910005760
    DOI: 10.1142/S0219024910005760
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    References listed on IDEAS

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    6. Geyer, Alois L J & Pichler, Stefan, 1999. "A State-Space Approach to Estimate and Test Multifactor Cox-Ingersoll-Ross Models of the Term Structure," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 22(1), pages 107-130, Spring.
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