Arbeitspapier
Testing for the Diffusion Matrix in a Continuous-Time Markov Process Model with Applications to the Term Structure of Interest Rates
The author proposes a test for the parametric specification of each component in the diffusion matrix of a d-dimensional diffusion process. Overall, d (d-1)/2 test statistics are constructed for the off-diagonal components, while d test statistics are constructed for the main diagonal components. Using theories of degenerate U-statistics, each of these test statistics is shown to follow an asymptotic standard normal distribution under null hypothesis, while diverging to infinity if the component is misspecified over a significant range. Our tests strongly reject the specification of diffusion functions in a variety of popular univariate interest rate models for daily 7-day eurodollar spot rates, and the specification of the diffusion matrix in some popular multivariate affine term-structure models for monthly U.S. Treasury yields.
- Sprache
-
Englisch
- Erschienen in
-
Series: Bank of Canada Working Paper ; No. 2015-17
- Klassifikation
-
Wirtschaft
Hypothesis Testing: General
Semiparametric and Nonparametric Methods: General
General Aggregative Models: Forecasting and Simulation: Models and Applications
Interest Rates: Determination, Term Structure, and Effects
Asset Pricing; Trading Volume; Bond Interest Rates
Financial Institutions and Services: General
- Thema
-
Asset pricing
Interest rates
Econometric and statistical methods
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Li, Fuchun
- Ereignis
-
Veröffentlichung
- (wer)
-
Bank of Canada
- (wo)
-
Ottawa
- (wann)
-
2015
- DOI
-
doi:10.34989/swp-2015-17
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:43 MEZ
Datenpartner
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Objekttyp
- Arbeitspapier
Beteiligte
- Li, Fuchun
- Bank of Canada
Entstanden
- 2015
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