Reducible diffusions with time-varying transformations with application to short-term interest rates
Reducible diffusions with time-varying transformations with application to short-term interest rates
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具有时变变换的可约扩散及其应用于短期利率
DOI：
10.1016/j.econmod.2014.10.039
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发表时间：
2016
影响因子：
4.7
通讯作者：
Bu R
中科院分区：
文献类型：
--
作者：
Bu R
可约扩散 (RD) 是可分析求解的基本扩散 (BD) 的非线性变换。因此，从结构上看，RD 是分析上易于处理且灵活的扩散过程。现有关于 RD 的文献主要集中在时间同质变换上，这在很大程度上未能从理论和实践的角度充分发掘 RD 的潜力。在本文中，我们提出了对 RD 转换进行灵活且经济合理的时间变化。我们专注于恒定弹性方差 (CEV) RD，考虑具有确定性和随机设计的时变变换的非线性动力学。这种时间变化可以极大地增强 RD 的灵活性，同时保持所得模型的足够易处理性。与此同时，我们的建模方法享有最大似然（ML）等经典推理技术的优势。我们对英国和美国短期利率的应用表明，从实证角度来看，时变变换具有高度相关性和统计显着性。我们期望所提出的模型能够更真实地描述经济和金融变量的动态时变行为，并有可能显着改善样本外预测。
Reducible diffusions (RDs) are nonlinear transformations of analytically solvable Basic Diffusions (BDs). Hence, by construction RDs are analytically tractable and flexible diffusion processes. Existing literature on RDs has mostly focused on time-homogeneous transformations, which to a significant extent fail to explore the full potential of RDs from both theoretical and practical points of view. In this paper, we propose flexible and economically justifiable time variations to the transformations of RDs. Concentrating on the Constant Elasticity Variance (CEV) RDs, we consider nonlinear dynamics for our time-varying transformations with both deterministic and stochastic designs. Such time variations can greatly enhance the flexibility of RDs while maintaining sufficient tractability of the resulting models. In the meantime, our modeling approach enjoys the benefits of classical inferential techniques such as the Maximum Likelihood (ML). Our application to the UK and the US short-term interest rates suggests that from an empirical point of view time-varying transformations are highly relevant and statistically significant. We expect that the proposed models can describe more truthfully the dynamic time-varying behavior of economic and financial variables and potentially improve out-of-sample forecasts significantly.