E43 - Interest Rates: Determination, Term Structure, and Effects

• Testing for the Diffusion Matrix in a Continuous-Time Markov Process Model with Applications to the Term Structure of Interest Rates

  Staff Working Paper 2015-17 Fuchun Li

  The author proposes a test for the parametric specification of each component in the diffusion matrix of a d-dimensional diffusion process. Overall, d (d-1)/2 test statistics are constructed for the off-diagonal components, while d test statistics are constructed for the main diagonal components.

  Content Type(s): Staff research, Staff working papers Topic(s): Asset pricing, Econometric and statistical methods, Interest rates JEL Code(s): C, C1, C12, C14, E, E1, E17, E4, E43, G, G1, G12, G2, G20