ABSTRACT

We outline a subclass of linear-rational term structure models, based on CEV dynamics. A tractable and arbitrage-free term structure results from the linear-rational aspect of the model, independently of the term-structure volatility dynamics that follow from the CEV specification. This specification is devised to capture a flexible degree of volatility-level dependence, i.e., the degree to which yield-curve volatility depends on yield levels. We estimate the model based on a panel of South African swap rates, and extract the degree of volatility-level dependence inherent in the time series of rates, without interference from the shape of the swap curve. The CEV exponent parameters are found to be essential for matching the low degree of volatility-level dependence that tends to be observed in the high interest-rate environments of emerging markets.

摘要

我们概述了基于 CEV 动力学的线性有理期限结构模型的子类。易于处理且无套利的期限结构来自模型的线性理性方面，与 CEV 规范所遵循的期限结构波动动态无关。该规范旨在捕捉波动率水平依赖性的灵活程度，即收益率曲线波动率取决于收益率水平的程度。我们根据一组南非掉期利率估计模型，并提取利率时间序列中固有的波动率水平依赖性程度，而不受掉期曲线形状的干扰。