## A Nonparametric Model of Term Structure Dynamics and the Market Price of Interest Rate Risk (1997)

Citations: | 126 - 5 self |

### BibTeX

@MISC{Stanton97anonparametric,

author = {Richard Stanton},

title = {A Nonparametric Model of Term Structure Dynamics and the Market Price of Interest Rate Risk},

year = {1997}

}

### Years of Citing Articles

### OpenURL

### Abstract

This article presents a technique for nonparametrically estimating continuous-time di#usion processes which are observed at discrete intervals. We illustrate the methodology by using daily three and six month Treasury Bill data, from January 1965 to July 1995, to estimate the drift and di#usion of the short rate, and the market price of interest rate risk. While the estimated di#usion is similar to that estimated by Chan, Karolyi, Longsta# and Sanders (1992), there is evidence of substantial nonlinearity in the drift. This is close to zero for low and medium interest rates, but mean reversion increases sharply at higher interest rates.