Benito, Sonia and Novales Cinca, Alfonso (2005) A factor analysis of volatility across the term structure: the Spanish case. [ Documentos de Trabajo del Instituto Complutense de Análisis Económico (ICAE); nº 0502, 2005, ]

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Official URL: http://eprints.ucm.es/7872/
Abstract
We show how the term structure of volatilities for zerocupon interest rates from the Spanish secondary debt market can be explained by a reduced number of factors. This factor representation can be used to produce time series volatilities across the whole term structure. As an alternative, volatilities can also be derived from a factor model for interest rates themselves. We find evidence contrary to the hypothesis that these two procedures lead to statistically equivalent time series, so that choosing the right model to estimate volatility is far from trivial. The volatility factor model fits univariate EGARCH volatility time series much better than the interest rate factor model does. However, observed differences seem to be of little
consequence for VaR estimation on zero coupon bonds.
Item Type:  Working Paper or Technical Report 

Uncontrolled Keywords:  analysis of volatility 
Subjects:  Social sciences > Economics > Econometrics 
Series Name:  Documentos de Trabajo del Instituto Complutense de Análisis Económico (ICAE) 
Volume:  2005 
Number:  0502 
ID Code:  7872 
References: 
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Deposited On:  28 Apr 2008 
Last Modified:  06 Feb 2014 07:56 
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