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Term Structure of Interest Rates. Emergence of Power Laws and Scaling Laws

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  • Thomas Alderweireld
  • Jean Nuyts

Abstract

The technique of Pad\'e 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

  • Thomas Alderweireld & Jean Nuyts, 2003. "Term Structure of Interest Rates. Emergence of Power Laws and Scaling Laws," EERI Research Paper Series EERI_RP_2003_05, Economics and Econometrics Research Institute (EERI), Brussels.
    • Handle: RePEc:eei:rpaper:eeri_rp_2003_05
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    File URL: http://www.eeri.eu/documents/wp/EERI_RP_2003_05.pdf
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    References listed on IDEAS

    as
    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. Rafał Weron, 2001. "Levy-Stable Distributions Revisited: Tail Index> 2does Not Exclude The Levy-Stable Regime," International Journal of Modern Physics C (IJMPC), World Scientific Publishing Co. Pte. Ltd., vol. 12(02), pages 209-223.
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    More about this item

    Keywords

    Interest rates scaling laws;

    JEL classification:

    • B23 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Econometrics; Quantitative and Mathematical Studies
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation

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