est.vasicek: Estimates the parameters of the Vasicek model. ~~

In SMFI5: R functions and data from Chapter 5 of 'Statistical Methods for Financial Engineering'

Description

Estimates the parameters of the Vasicek model. dr = alpha(beta-r)dt + sigma dW,

with market price of risk q(r) = q1+q2 r. The time scale is in years and the units are percentages.

Usage

est.vasicek(data, method = "Hessian", days = 360, significanceLevel = 0.95)

Arguments

data	c(R,tau) (n x 2), with R: annual bonds yields in percentage, and tau: maturities in years;
method	'Hessian' (default), 'num';
days	number of days per year (default: 360);
significanceLevel	95%(default)

Value

theta	parameters (alpha, beta, sigma, q1,q2) of the model;
error	estimation errors for the given confidence level;
rimp	implied spot rate.

Note

Translated from Matlab by David-Shaun Guay (HEC Montreal grant).

Author(s)

Bruno Remillard

References

Chapter 5 of 'Statistical Methods for Financial Engineering, B. Remillard, CRC Press, (2013).

Examples

data(data.vasicek)
out = est.vasicek(data.vasicek)

Example output

Loading required package: ggplot2
Loading required package: reshape
Loading required package: corpcor
Are you a satisfied with the graph? 


The estimated coefficients correspond to the annualized spot rate.

Fisher information computed with the numerical Hessian from fminunc (Appendix B.5.1)


 alpha = 1.3121 /+ 1.1887 

  beta = 2.6406 /+ 0.3527 

 sigma = 0.3642 /+ 0.0219 

  q1 = 6.7429 /+ 9.6834 

  q2 = -2.2965 /+ 3.3394 

  phi = 0.9986,  phiest = 0.9964 /+ 0.0033 

SMFI5 documentation built on May 2, 2019, 10:25 a.m.