Estimating the long rate and its volatility

Annaert, Jan;Claes, Anouk;De Ceuster, Marc;Zhang, Hairui
(2015) Economics Letters —

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ShortRateanditsVolatility.pdf
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Authors
  • Annaert, JanUniversiteit Antwerpen
    Author
  • Claes, AnoukUSL-B
    Author
  • De Ceuster, MarcUniversiteit Antwerpen
    Author
  • Zhang, HairuiUSL-B
    Author
Abstract
We estimate the long rate and its volatility within the Svensson framework. The procedure that best extrapolates the longest observable rate and its volatility is a 2-dimensional grid search conditioned on the ridge regression suggested by Annaert et al. (2013).
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Annaert, J., Claes, A., De Ceuster, M., & Zhang, H. (2015). Estimating the long rate and its volatility. Economics Letters. https://doi.org/10.1016/j.econlet.2015.02.022