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Are there nonlinearities in short-term interest rates?

Treepongkaruna, Sirimon; Gray, Stephen


The present paper investigates the characteristics of short-term interest rates in several countries. We examine the importance of nonlinearities in the mean reversion and volatility of short-term interest rates. We examine various models that allow the conditional mean (drift) and conditional variance (diffusion) to be functions of the current short rate. We find that different markets require different models. In particular, we find evidence of nonlinear mean reversion in some of the...[Show more]

CollectionsANU Research Publications
Date published: 2006
Type: Journal article
Source: Accounting and Finance
DOI: 10.1111/j.1467-629X.2006.00151.x


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