期刊名称：Departmental Discussion Papers / University of Glasgow, Department of Economics
出版年度：2005
卷号：1
出版社：University of Glasgow, Department of Economics
摘要：The purpose of this paper is to see how the term structure of interest rates has evolved
in the sterling and euro treasury bond markets over the period 1999-2003. German
bonds have been used as a proxy for euro-denominated bonds. A state-space
representation for the single-factor Cox, Ingersoll and Ross (1985) model is employed
to analyse the intertemporal dynamics of the term structure. Quasi-maximum
likelihood estimates of the model parameters are obtained by using the Kalman filter
to calculate the likelihood function. Results of the empirical analysis show that while
the unobserved instantaneous interest rate exhibits mean reverting behaviour in both
the UK and Germany, the mean reversion of the interest rate process has been
relatively slower in the UK. The volatility component, which shocks the process at
each step in time is also higher in the UK as compared to Germany.
