Abstract
Abstract This paper investigates the stochastic behaviour of the short-term interest rates. The lognormal model, the stable Paretian model and the continuous time mean reversion model are considered. The parameters of the models are estimated using 17 years of weekly data. Our results show that the lognormal and the stable Paretian models are likely to give rise to unreasonably large interest rate values even for horizon of five years. In comparison, the mean reversion model appears to provide more realistic results than the other two models.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
