Jump Diffusion Modelling for the Brazilian Short-Term Interest Rate
In order to capture the informational effect of the Brazilian short-term interest rate (SELIC rate) by Poisson jumps, we build on the tests conducted by Das (2002) and Johannes (2004), which show the significance of such structures for U.S. Federal Open Market Committee (FOMC) announcements. As in the above researches, we have found evidence that a relevant amount of the short-term volatility in the fixed income market is captured by introducing jumps on the stochastic process of the short-term rate. This structure also allows the verification of the information content of specific events, such as Brazilian monetary policy authority (COPOM) meetings and public bond auctions.
Year of publication: |
2015
|
---|---|
Authors: | Filho, José Carlos Nogueira Cavalcante ; Gonçalves, Edson Daniel Lopes |
Published in: |
Brazilian Business Review. - Fundação Instituto Capixaba de Pesquisas em Contabilidade, Economia e Finanças (FUCAPE). - Vol. 12.2015, 1, p. 80-103
|
Publisher: |
Fundação Instituto Capixaba de Pesquisas em Contabilidade, Economia e Finanças (FUCAPE) |
Keywords: | Stochastic process. Broadcasts. Selic rate. Poisson jumps. Fixed income |
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