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SUMMARY:Likelihood Inference in Non-Linear Term Structure Models: The Impo
 rtance of the Zero Lower Bound - Andrew Meldrum (Faculty of Economics)
DTSTART:20110208T163000Z
DTEND:20110208T173000Z
UID:TALK29354@talks.cam.ac.uk
CONTACT:Rachel Marston
DESCRIPTION:This paper shows how to use adaptive particle filtering and Ma
 rkov chain Monte Carlo methods to estimate quadratic term structure models
  (QTSMs) by likelihood inference. The procedure is applied to quadratic mo
 dels for the US and UK during the recent financial crisis. We find that th
 ese models provide a better statistical description of the data than Gauss
 ian affine term structure models. In addition\, QTSMs account perfectly fo
 r the zero lower bound whereas Gaussian affine models frequently imply for
 ecast distributions with negative interest rates. Such predictions appear 
 during the recent financial crisis in the US and UK but also prior to the 
 crisis.
LOCATION:Winstanley Lecture Hall\, Trinity College
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