2010 Fiscal Year Final Research Report
Predictability of Interest Rates : An Analysis Using Dynamic Term Structure Models
| Project/Area Number |
21730170
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| Research Category |
Grant-in-Aid for Young Scientists (B)
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| Allocation Type | Single-year Grants |
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| Research Field |
Economic statistics
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| Research Institution | University of Tsukuba |
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Principal Investigator |
TAKAMIZAWA Hideyuki University of Tsukuba, 大学院・人文社会科学研究科, 准教授 (60361854)
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| Project Period (FY) |
2009 – 2010
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| Keywords | 計量ファイナンス / 金利期間構造 / イールドカーブ / ボラティリティ |
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| Research Abstract |
Existing dynamic term structure models have restrictions necessary for deriving bond prices in closed-form under non-arbitrage conditions, which, however, deteriorate the predictive power to the level and volatility of interest rates. This study removes such restrictions by relying on an accurate approximation method. By specifying the volatility as nonlinear functions of interest rate levels, the proposed models exhibit higher predictive power than the existing restrictive models. In addition, by combining the volatility forecast of the proposed models with that of time-series models such as GARCH, it is confirmed that the predictive power further increases.
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