This paper tests the Cox, Ingersoll and Ross model using the prices of Italian Treasury bonds in the secondary market. The model is estimated daily for the period 30 December 1983 to 13 March 1989. The resulting term structures of interest rates are compared with those obtained using interpolation techniques (the cubic splines method). The daily estimation of the yield curves also makes it possible to analyze the changes in Treasury bond prices, determine the turning points and obtain useful indications regarding the efficiency of the secondary market and the consistency between the primary and the secondary markets.
An Integrated System for the Management of Interest Rate Risk / Barone, Emilio; Bragho', A.. - (2004). [10.2139/ssrn.512529]
An Integrated System for the Management of Interest Rate Risk
BARONE, EMILIO;
2004
Abstract
This paper tests the Cox, Ingersoll and Ross model using the prices of Italian Treasury bonds in the secondary market. The model is estimated daily for the period 30 December 1983 to 13 March 1989. The resulting term structures of interest rates are compared with those obtained using interpolation techniques (the cubic splines method). The daily estimation of the yield curves also makes it possible to analyze the changes in Treasury bond prices, determine the turning points and obtain useful indications regarding the efficiency of the secondary market and the consistency between the primary and the secondary markets.
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