Exploration of the Brazilian Term Structure in a Hidden Markov Framework
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.
Publication date: January 2011
ISBN: 9781455211937
$18.00
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Economics- Macroeconomics , Economics / General , International - Economics , parameters , probability , forecasting , covariance , statistics , markov process , markov chain , probabilities , time series , number of parameters , samples , equations , explanatory power , significance level , heteroscedasticity , standard errors , parameter vector , random walk , rand
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