This study includes three issues about the dynamic of 30-days Taiwan Commercial Paper rate (CP2).The first issue focuses on the estimation of continuous-time short-term interest rate models. We discretize the continuous-time models by using two different approaches, and then use weekly and monthly data to estimate the parameters. The models are evaluated by data fit. We find that the estimated parameters are similar for different discretization approaches and would be more stable and efficient under quasi-maximum likelihood (QML) with weekly data. There exists mean reversion for Taiwan CP rate and the relationship between the volatility and the level of interest rates are less than 1 and smaller than that of American T-Bill rates reported by CKLS (1992) and Nowman (1997). We also find that CIR-SR model performs best for Taiwan CP rate.
The second issue compares the continuous-time short-term interest rate models empirically both by predictive accuracy test and encompassing test. Having the estimated parameters of the models by discretization of Nowman(1997) and QML, we produce the forecasts on conditional mean and volatility for the interest rate over multiple-step-ahead horizons. The results indicate that the sophisticated models outperform the simpler models in the in-sample data fit, but have a distinct performance in the out-of-sample forecasting. The models equipped with mean reversion can produce better forecasts on conditional means during some period, and the heteroskedasticity variance model with outperform counterparts in volatility forecasting in some periods.
The third issue concerns the persistent and massive volatility of short-term interest rates. This part inquires how the realizations on Taiwan short-term interest rates can be best described empirically. Various popular volatility specifications are estimated and tested. The empirical findings reveal that the mean reversion is an important characteristic for the Taiwan interest rates, and the level effect exists. Overall, the GARCH-L model fits well to Taiwan interest rates.
| Identifer | oai:union.ndltd.org:NSYSU/oai:NSYSU:etd-1210106-170026 |
| Date | 10 December 2006 |
| Creators | Lien, Chun-Hung |
| Contributors | Ching-Nun Lee, Szu-Lang Liao, So-De Shyu, Biing-Shen Kuo, Ming-Chi Chen |
| Publisher | NSYSU |
| Source Sets | NSYSU Electronic Thesis and Dissertation Archive |
| Language | Cholon |
| Detected Language | English |
| Type | text |
| Format | application/pdf |
| Source | http://etd.lib.nsysu.edu.tw/ETD-db/ETD-search/view_etd?URN=etd-1210106-170026 |
| Rights | restricted, Copyright information available at source archive |
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