The Multifactor Nature of the Volatility of the Eurodollar Futures Market
Quantitative Finance Research Centre Research Paper No. 150
15 Pages Posted: 2 May 2006
Date Written: January 2005
Abstract
This paper seeks to estimate a multifactor volatility model so as to describe the dynamics of interest rate markets, using data from the highly liquid but short term futures markets. The difficult problem of estimating such multifactor models is resolved by using a genetic algorithm to carry out the optimization procedure. The ability to successfully estimate a multifactor volatility model also eliminates the need to include a jump component, the existence of which would create difficulties in the practical use of interest rate models, such as pricing options or producing forecasts.
Keywords: term structure, volatility, mutlifactor, jump, Eurodollar futures, genetic algorithm
JEL Classification: C51, C61, E43
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Nonparametric Pricing of Interest Rate Derivative Securities
-
Back to the Future: Generating Moment Implications for Continuous-Time Markov Processes
-
Maximum-Likelihood Estimation of Discretely Sampled Diffusions: A Closed-Form Approach
-
Maximum Likelihood Estimation of Discretely Sampled Diffusions: A Closed-Form Approach
-
Is the Short Rate Drift Actually Nonlinear?
By David A. Chapman and Neil D. Pearson
-
Nonparametric Density Estimation and Tests of Continuous Time Interest Rate Models
-
Maximum Likelihood Estimation of Generalized Ito Processes with Discretely Sampled Data
By Andrew W. Lo
-
Maximum Likelihood Estimation of Generalized Ito Processes with Discretely Sampled Data
By Andrew W. Lo
-
Closed-Form Likelihood Expansions for Multivariate Diffusions