The Estimation of the Heath-Jarrow-Morton Model by Use of Kalman Filtering Techniques

U. of Technology, Sydney Finance and Economics Working Paper No. 54

23 Pages Posted: 21 Feb 2006

See all articles by Ramaprasad Bhar

Ramaprasad Bhar

UNSW, Risk and Actuarial Studies

Carl Chiarella

University of Technology, Sydney - UTS Business School, Finance Discipline Group

Date Written: December 1995

Abstract

A fairly flexible functional form for the forward rate volatility is applied in the Heath-Jarrow-Morton model of the term structure of interest rates to reduce the system dynamics to Markovian form. The resulting stochastic dynamic system is cast into a form suitable for estimation by use of nonlinear filtering methodology. The technique is applied to 90-day bank bill and 3-year treasury bond data in the Australian market.

Suggested Citation

Bhar, Ramaprasad and Chiarella, Carl, The Estimation of the Heath-Jarrow-Morton Model by Use of Kalman Filtering Techniques (December 1995). U. of Technology, Sydney Finance and Economics Working Paper No. 54, Available at SSRN: https://ssrn.com/abstract=882664 or http://dx.doi.org/10.2139/ssrn.882664

Ramaprasad Bhar

UNSW, Risk and Actuarial Studies ( email )

Sydney, NSW 2052
Australia

Carl Chiarella (Contact Author)

University of Technology, Sydney - UTS Business School, Finance Discipline Group ( email )

PO Box 123
Broadway, NSW 2007
Australia
+61 2 9514 7719 (Phone)
+61 2 9514 7711 (Fax)

HOME PAGE: http://www.business.uts.edu.au/finance/

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