Maximum Likelihood Estimation of Continuous-Time Diffusion Models for Korean Short-Term Interest Rates

摘要: The purpose of this paper is to estimate a general continuous-time diffusion model for short term interest rates using Korean data. enough encompass almost all the models suggested in literature explain dynamics rates. We approximate true but unknown conditional transition probability density function process At-Sahalia's (2008) irreducible method conduct maximum likelihood estimation. overnight call rate and 91 day CD have been adopted as proxy rate. Overall, estimation results are quite similar both could not find any significant evidence nonlinearity drift either data series. However, rates, linear statistically different from zero at high obtain very estimates parameters volatility sets. an increasing also found some that underlying generating might change over time.