Unifying Gaussian Dynamic Term Structure Models from a Heath-Jarrow-Morton Perspective
| Autor: | Fan Yu, Xiaoxia Ye, Haitao Li |
|---|---|
| Jazyk: | angličtina |
| Rok vydání: | 2020 |
| Předmět: |
Flexibility (engineering)
Structure (mathematical logic) 050210 logistics & transportation 021103 operations research Information Systems and Management Heath–Jarrow–Morton framework General Computer Science Interest rate derivative Computer science Gaussian 05 social sciences 0211 other engineering and technologies 02 engineering and technology Management Science and Operations Research Industrial and Manufacturing Engineering Term (time) symbols.namesake Empirical research Modeling and Simulation Forward rate 0502 economics and business symbols Mathematical economics |
| Zdroj: | European Journal of Operational Research |
| Popis: | In this paper, we show that most existing Gaussian dynamic term structure models (GDTSMs) can be nested as special cases under a unified Heath–Jarrow–Morton (HJM)-based framework of GDTSM construction. Our study provides not only a systematic way to examine the commonality of many seemingly distinct GDTSMs, but also a novel and convenient approach to constructing GDTSMs that are otherwise unavailable or intractable under the traditional approach. In our empirical study using the Euro area forward rates, we conduct a specification analysis based on this novel approach. The analysis reveals that the traditional models impose restrictive constraints limiting their flexibility in capturing key features of the correlations and volatilities of the forward rates. |
| Databáze: | OpenAIRE |
| Externí odkaz: |
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