Exploration of the Brazilian Term Structure in a Hidden Markov Framework

Author/Editor: Richard Munclinger
Publication Date: January 01, 2011
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Summary: We apply a hidden Markov model of the term structure to modeling the Brazilian swap rate curve. We examine the model''s characteristics and its performance in describing the cross-sectional and time-series dynamics of the term structure. Two regimes are identified, a high level and a high volatility regime and a low level and low volatility regime. Both regimes are persistent and are explained by the level and the slope of the term structure. The model is estimated using a Bayesian MCM algorithm that produces consistent standard errors and a reliable method for testing the differences between the model parameters.
Series: Working Paper No. 11/22
Subject(s): Bonds | Economic models | Interest rates

Author's Keyword(s): Term Structure | Hidden Markov Models | MCMC | ATSM | Brazil
Publication Date: January 01, 2011
ISBN/ISSN: 9781455211937/1018-5941 Format: Paper
Stock No: WPIEA2011022 Pages: 31
US$18.00 (Academic Rate:
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