Modelling and Forecasting Short-Term Interest Rate Volatility: A Semiparametric Approach
This paper employs a semiparametric procedure to estimate the diffusion process of short-term interest rates. The Monte Carlo study shows that the semiparametric approach produces more accurate volatility estimates than models that accommodate asymmetry, levels e¤ect and serial dependence in the conditional variance. Moreover, the semiparametric approach yields robust volatility estimates even if