Finance Discipline Group
UTS Business School
University of Technology, Sydney

Working Paper Series

Title:
Estimating the Term Structure of Volatility in Futures Yield - A Maximum Likelihood Approach
Author(s): Ram Bhar and Carl Chiarella
Date of publication: December 1995
Working paper number: 56
Abstract:
The volatility structure of 90-day bill futures traded on the the Sydney Futures Exchange is analysed within the framework of the Heath-Jarrow-Morton model. The method involves characterisation of the transition probability density function for the forward rate process represented by the stochastic differential equation in the arbitrage-free economy. Maximisation of the likelihood function then results in the estimates of the parameters of the volatility function. The volatility function is also used in a simulation of the preference-free stochastic differential equation for bill prices.
Paper: Download (Format: PDF, Size: 322 Kb)
Known citations:

Bhar, R. and Chiarella, C. 1996, Construction of Zero-Coupon Yield Curve from Coupon Bond Yield Using Australian Data, Working Paper: 70, Finance Discipline Group, University of Technology, Sydney.