A Note on the Bias of using Futures Rates as a Proxy for the Instantaneous Forward Rate

The note shows that there is a non-negligible bias in using the futures rates as a proxy for the instantaneous forward rates in the estimation of forward rate models. It is therefore desirable to derive the evolution of observable rates, then use the distributional properties of this evolution to do the estimation. In a general case where these properties are hard to obtained, a filtering technique is required.

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Year of publication:	2004-12-01
Authors:	To, Thuy-Duong
Institutions:	Finance Discipline Group, Business School
Subject:	Heath-Jarrow-Morton \| forward rate \| futures \| estimation bias

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Extent:	application/pdf
Series:	Research Paper Series.
Type of publication:	Book / Working Paper
Notes:	Number 149 1 pages long
Classification:	C51 - Model Construction and Estimation ; E43 - Determination of Interest Rates; Term Structure Interest Rates ; G12 - Asset Pricing ; G13 - Contingent Pricing; Futures Pricing
Source:	RePEc - Research Papers in Economics

Persistent link: https://ebvufind01.dmz1.zbw.eu/10004984534