Journal of Management Sciences
ISSN: 2313-0113 (Online)
ISSN: 2413-8657 (Print)
Online From: 2014
Latest Issue | All Issues | Early Views
Frequency: 2 issues per year
Volume 1 Issue 1 - Latest Issue
Published: 2014
Published: 2014
| Article title | Application of Kalman Filter on modelling interest rates |
|---|---|
| Author(s) | Long H. Vo |
| Keywords | Term structure, maximum likelihood, state space, CIR model |
| Article type | Research paper |
| Abstract | This study aims to test the feasibility of using a data set of 90-day bank bill forward rates from the Australian market to predict spot interest rates. To achieve this goal I utilized the application of Kalman Filter in a state space model with time-varying state variable. It is documented that in the case of short-term interest rates,the state space model yields robust predictive power. In addition, this predictive power of implied forward rate is heavily impacted by the existence of a time-varying risk premium in the term structure. |
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