Title: Modelling interest rate volatility: Regime switches and level links
Authors: Dewachter, Hans # ×
Issue Date: 1996
Publisher: J c b mohr
Series Title: Weltwirtschaftliches archiv-review of world economics vol:132 issue:2 pages:236-258
Abstract: This paper presents a model encompassing the Markov switching model and the model based on a volatility-level link. This encompassing model allows to test these competing classes of volatility models against each other. If is found that both classes capture essential but different features of the interest rate volatility process. A volatility model incorporating both features, i.e., regime switches and level links, clearly outperforms both alternatives. The consequences of this finding, both for volatility prediction and for the selection of the more appropriate theoretical (continuous time) interest rate model, are discussed.
ISSN: 0043-2636
Publication status: published
KU Leuven publication type: IT
Appears in Collections:Research Center of International Economics, Leuven
× corresponding author
# (joint) last author

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