Journal article
On the Nonlinear Specifications of Short-Term Interest Rate Behavior: Evidence from Euro-Currency Markets
Review of quantitative finance and accounting, v 12(4), pp 351-370
01 Jun 1999
Abstract
This paper presents a coherent nonlinear interest rate model that incorporates the dynamics of the error correction specification into the traditional term structure model. The joint tests based on six Euro-Currency rates indicate that the linear specification should be rejected. The estimated equation suggests that the linear components--the change of the long-term interest rate and the error correcting term are highly significant. The nonlinear components involving the higher order of the independent variables, the cross products, the lagged error squares, and/or the ARCH effect also present significant explanatory power for predicting short-term Euro-Currency rate changes, confirming the non-linear specifications.
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Details
- Title
- On the Nonlinear Specifications of Short-Term Interest Rate Behavior: Evidence from Euro-Currency Markets
- Creators
- Thomas Chiang - Drexel UniversityJeanette Chiang - PV International, USA
- Publication Details
- Review of quantitative finance and accounting, v 12(4), pp 351-370
- Resource Type
- Journal article
- Language
- English
- Academic Unit
- [Retired Faculty]
- Scopus ID
- 2-s2.0-53149100134
- Other Identifier
- 991019173619104721