The Estimation of the Heath-Jarrow-Morton Model by Use of Kalman Filtering Techniques
|Author(s):||Ram Bhar and Carl Chiarella|
|Date of publication:||December 1995|
|Working paper number:||54|
A fairly flexible functional form for the forward rate volatility is applied in the Heath-JarrowMorton model of the term structure of interest rates to reduce the system dynamics to Markovian form. The resulting stochastic dynamlc system is cast into a form suitable for estimation by use of nonlinear filter methodology. The technique is applied to 90 day bank bill and 3 year treasury bond data in the Australian market.
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Published as: Bhar, R. and Chiarella, C., 1997, "The Estimation of the Heath-Jarrow-Morton Model by Use of Kalman Filtering Techniques", in H. Amman et al (eds) Computational Approaches to Economic Problems, Kluwer Academic Publishers, pp. 113-126.
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