Abstract
The current prices and interest rate sensitivities of interest rate derivatives depend on the stochastic behaviour of future term structures of interest rates. In this paper we present an arbitrage-free trinomial model to characterize possible changes of interest rates. This model is used to estimate the transition behaviour of term structures of interest rates in the German bond market.
Similar content being viewed by others
References
Bliss R, Ronn E (1989) Arbitrage-Based Estimation of Nonstationary Shifts in the Term Structure of Interest Rates. Journal of Finance 44: 591–610
Bradley S, Crane D (1973) Management of Commercial Bank Government Security Portfolios: An Optimization Approach under Uncertainty. Journal of Bank Research 6: 18–30
Bühler W, Schulze M (1991) Schätzung von Diskontfunktionen und deren arbitragefreien Übergangsverhalten im Zeitablauf. Zwischenbericht über die bisherigen Arbeiten im Rahmen des Projektes “Zinsoptionen” im Rahmen des Forschungsschwerpunktes “Empirische Kapitalmarktforschung” der Deutschen Forschungsgemeinschaft. University of Mannheim
Carleton W, Cooper I (1976) Estimation and Uses of the Term Structure of Interest Rates. Journal of Finance 31: 1067–1084
Chambers D, Carleton W, Waldman D (1984) A New Approach to Estimation of the Term Structure of Interest Rates. Journal of Financial and Quantitative Analysis 19: 233–252
Cox J, Ingersoll J, Ross S (1981) A Re-Examination of Traditional Hypotheses about the Term Structure of Interest Rates. Journal of Finance 36: 769–799
Cox J, Ingersoll J, Ross S (1981) A Theory of the Term Structure of Interest Rates. Econometrica 53: 385–407
Cox J, Ross S, Rubinstein M (1979) Option Pricing: A Simplified Approach. Journal of Financial Economics 7: 229–263
Heath D, Jarrow R, Morton A (1990): Bond Pricing and the Term Structure of Interest Rates: A Discrete Time Approximation. Journal of Financial and Quantitative Analysis 26: 419–440
Herzog W (1990) Zinsänderungsrisiken in Kreditinstituten. Gabler, Wiesbaden
Ho T, Lee S (1986) Term Structure Movements and Pricing Interest Rate Contingent Claims. Journal of Finance 41: 1011–1029
Jensen B, Nielsen J (1991) The Structure of Binomial Lattice Models for Bonds. Working Paper 91/1, Institute of Finance, Copenhagen School of Economics and Business Administration
Judge G, Griffiths W, Hill R, Lütkepohl H, Lee T (1985) The Theory and Practice of Econometrics, 2nd edn. Wiley, New York
Litzenberger R, Rolfo J (1984) An International Study of Tax Effects on Government Bonds. Journal of Finance 39: 1–22
Lutz F (1967) Zinstheorie. Mohr, Zürich-Tübingen
Mc Culloch J (1971) Measuring the Term Structure of Interest Rates. Journal of Business 44: 19–31
Schaefer S (1981) Measuring a Tax-Specific Term Structure of Interest Rates in the Market for British Government Securities. The Economic Journal 91: 415–438
Seber G, Wild C (1989) Nonlinear Regression. Wiley, New York
Shea G (1984) Pitfalls from Smoothing Interest Rate Term Structure Data: Equilibrium Models and Spline Approximations. Journal of Financial and Quantitative Analysis 19: 253–269
Shiller R (1990) The Term Structure of Interest Rates. In: Handbook of Monetary Economics, Eds.: Friedman B, Hahn F, North-Holland, Amsterdam, 627–722
Van Horne J (1990) Financial Market Rates and Flows, 3rd edn. Prentice-Hall, Englewood Cliffs
Author information
Authors and Affiliations
Additional information
Research support from the Deutsche Forschungsgemeinschaft under the project Bu 671-2 within the Schwerpunktprogramm “Empirische Kapitalmarktforschung” is gratefully acknowledged. Comments by the editor, G. Bamberg, on an earlier version of this paper are very much appreciated.
Rights and permissions
About this article
Cite this article
Bühler, W., Schulze, M. Estimation of the transition behaviour of term structures of interest rates. Statistical Papers 32, 281–297 (1991). https://doi.org/10.1007/BF02925503
Received:
Revised:
Issue Date:
DOI: https://doi.org/10.1007/BF02925503