APPLICATION OF MAXIMUM LIKELIHOOD ESTIMATION TO STOCHASTIC SHORT RATE MODELS

FERGUSSON, K; PLATEN, E

APPLICATION OF MAXIMUM LIKELIHOOD ESTIMATION TO STOCHASTIC SHORT RATE MODELS

FERGUSSON, K PLATEN, E

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Publisher:: World Scientific Publishing
Publication Type:: Journal Article
Citation:: Annals of Financial Economics, 2015, 10 (02), pp. 1 - 26
Issue Date:: 2015-12

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Field	Value	Language
dc.contributor.author	FERGUSSON, K	en_US
dc.contributor.author	PLATEN, E https://orcid.org/0000-0003-4595-3123	en_US
dc.date.available	2020-05-25T19:03:40Z
dc.date.issued	2015-12	en_US
dc.identifier.citation	Annals of Financial Economics, 2015, 10 (02), pp. 1 - 26	en_US
dc.identifier.issn	2010-4952	en_US
dc.identifier.uri	http://hdl.handle.net/10453/41447
dc.description.abstract	The application of maximum likelihood estimation is not well studied for stochastic short rate models because of the cumbersome detail of this approach. We investigate the applicability of maximum likelihood estimation to stochastic short rate models. We restrict our consideration to three important short rate models, namely the Vasicek, Cox–Ingersoll–Ross (CIR) and 3/2 short rate models, each having a closed-form formula for the transition density function. The parameters of the three interest rate models are fitted to US cash rates and are found to be consistent with market assessments.	en_US
dc.publisher	World Scientific Publishing	en_US
dc.relation.ispartof	Annals of Financial Economics	en_US
dc.relation.isbasedon	10.1142/S2010495215500098	en_US
dc.title	APPLICATION OF MAXIMUM LIKELIHOOD ESTIMATION TO STOCHASTIC SHORT RATE MODELS	en_US
dc.type	Journal Article
utslib.citation.volume	02	en_US
utslib.citation.volume	10	en_US
utslib.for	1502 Banking, Finance and Investment	en_US
utslib.for	1402 Applied Economics	en_US
utslib.for	0103 Numerical and Computational Mathematics	en_US
pubs.embargo.period	Not known	en_US
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
pubs.organisational-group	/University of Technology Sydney/Faculty of Science
pubs.organisational-group	/University of Technology Sydney/Faculty of Science/School of Mathematical and Physical Sciences
pubs.organisational-group	/University of Technology Sydney/Strength - QFRC - Quantitative Finance Research Centre
pubs.organisational-group	/University of Technology Sydney/Students
utslib.copyright.status	open_access
pubs.consider-herdc	false	en_US
pubs.issue	02	en_US
pubs.publication-status	Published	en_US
pubs.volume	10	en_US

Abstract:

The application of maximum likelihood estimation is not well studied for stochastic short rate models because of the cumbersome detail of this approach. We investigate the applicability of maximum likelihood estimation to stochastic short rate models. We restrict our consideration to three important short rate models, namely the Vasicek, Cox–Ingersoll–Ross (CIR) and 3/2 short rate models, each having a closed-form formula for the transition density function. The parameters of the three interest rate models are fitted to US cash rates and are found to be consistent with market assessments.

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http://hdl.handle.net/10453/41447