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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Publication Type:: Journal Article
Citation:: Annals of Financial Economics, 2015, 10 (02)
Issue Date:: 2015

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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.issued	2015	en_US
dc.identifier.citation	Annals of Financial Economics, 2015, 10 (02)	en_US
dc.identifier.uri	http://hdl.handle.net/10453/84697
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.relation.ispartof	Annals of Financial Economics	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	1402 Applied Economics	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 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
utslib.copyright.status	closed_access
pubs.declined	2017-03-10T10:25:58.238+1100
pubs.issue	02	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/10453/84697