Itô conditional moment generator and the estimation of short rate processes
By: Hao Zhou.
Series: Finance and economics discussion series ;; 2003-32; Finance and economics discussion series (Online) ;; 2003-32.
Publisher: Federal Reserve Board
Published: 2003
Place of publication: Washington, D.C
Language: eng
Format: Electronic resource
Description: "This paper exploits the It'̥s formula to derive the conditional moments vector for the class of interest rate models that allow for nonlinear volatility and flexible jump specifications.  Such a characterization of continuous-time processes by the Ito Conditional Moment Generator noticeably enlarges the admissible set beyond the affine jump-diffusion class.  A simple GMM estimator can be constructed based on the analytical solution to the lower order moments, with natural diagnostics of the conditional mean, variance, skewness, and kurtosis.  Monte Carlo evidence suggests that the proposed estimator has desirable finite sample properties, relative to the asymptotically efficient MLE.  The empirical application singles out the nonlinear quadratic variance as the key feature of the U.S.  short rate dynamics"--Federal Reserve Board web site.
Notes: Also available in print.
Includes bibliographical references.
Title from PDF file as viewed on 7/23/2004.
System requirements: Adobe Acrobat Reader.
Mode of access: World Wide Web.