Krishnan, C. N. V. (contributor); … - 2003 - [Elektronische Ressource]
forecast the direction of future changes in the interest rate, is “worth-
less.” However, later studies by Fama (1984), Mishkin … specification of the dynamics for the interest rate process, r(t) and the instantaneous spread,
s(t).
The full dynamics of the state …)] = ρ
us
dt, E
P
t
[dw
r
(t)dw
s
(t)] = ρ
rs
dt, a =
a + λ
r
σ
r
,andα
1
= α
1
+ λ
s
σ
s
.
8
Here, the interest rate …