Regime-switching models are well suited to capture the non-linearities in interest rates. This paper examines the econometric performance of regime-switching models for interest rate data from the US, Germany and the UK. There is strong evidence supporting the presence of regime switches but...

Natural systems witness reversion and divergence simultaneously across different periods of time. This paper tests the performance proxy as mentioned in a previous paper on the ‘Mean Reversion Framework' for Markov's transition probabilities. The framework exhibits a stable pattern when tested...