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Empirical tests of short-term interest rate models: a nonparametric approach

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  • Mikiyo Kii Niizeki
Abstract
Short-term interest rate models are investigated using daily data for both the US and Japan over the period October 1989 to January 1994. A nonparametric method is used to estimate the conditional mean and variance (volatility) of the short-term interest rate changes and to estimate their partial derivatives. In contrast to the Japanese interest rate, US interest rates exhibit mean reverting drift which is found to be nonlinear. The conditional variances of both US and Japanese interest rate changes are found to depend on the level of the interest rate nonlinearly.

Suggested Citation

  • Mikiyo Kii Niizeki, 1998. "Empirical tests of short-term interest rate models: a nonparametric approach," Applied Financial Economics, Taylor & Francis Journals, vol. 8(4), pages 347-352.
    • Handle: RePEc:taf:apfiec:v:8:y:1998:i:4:p:347-352
    DOI: 10.1080/096031098332871
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    Cited by:

    1. Anil Kumar, 2006. "Nonparametric conditional density estimation of labour force participation," Applied Economics Letters, Taylor & Francis Journals, vol. 13(13), pages 835-841.
    2. Nowman, K. Ben & Saltoglu, Burak, 2003. "Continuous time and nonparametric modelling of U.S. interest rate models," International Review of Financial Analysis, Elsevier, vol. 12(1), pages 25-34.
    3. Antonio Mele, 2003. "Fundamental Properties of Bond Prices in Models of the Short-Term Rate," The Review of Financial Studies, Society for Financial Studies, vol. 16(3), pages 679-716, July.
    4. Muteba Mwamba, John & Thabo, Lethaba & Uwilingiye, Josine, 2014. "Modelling the short-term interest rate with stochastic differential equation in continuous time: linear and nonlinear models," MPRA Paper 64386, University Library of Munich, Germany.

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