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| Author: | Sun, L. |
| Title: | Nonlinear drift and stochastic volatility: an empirical investigation of short-term interest rate models |
| Journal: | Journal of Financial Research
2003 : FALL, VOL. 26:3, p. 389-404 |
| Index terms: | Interest rates Stochastic processes Volatility |
| Language: | eng |
| Abstract: | New evidence is provided in this paper on the role of nonlinear drift and stochastic volatility in interest rate modeling. Various modeling spesification are compared for the short-term interest rate using data from five countries. It is found that modeling the stochastic volatility in the short rate is far more important than specifying the shape of the drift function. |
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