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MULTIFRACTAL MODELS AND SIMULATIONS OF THE U.S. TERM STRUCTURE

Jamdee, Sutthisit
http://rave.ohiolink.edu/etdc/view?acc_num=kent1115064950

Abstract Details

2005, PHD, Kent State University, College of Business and Entrepreneurship, Ambassador Crawford / Department of Finance.
Asset pricing modelers attempt to identify price diffusion processes from empirical financial market data. In particular, the Geometric Brownian Motion and the GARCH models are currently popular in these efforts. In contrast, for the first time this dissertation identifies Multifractal Models of Asset Return (MMARs) from the eight nodal term structure series of US Treasury rates as well as Fed Funds rate and, after proper synthesis, simulates those MMARs. The model performance results of these simulations are then compared with not only the original empirical time series, but also with the simulated results from the corresponding Brownian Motion and GARCH processes. The major findings are that the eight different maturity US Treasury and the Fed Funds rates are multifractal processes. The MMAR outperforms both the GBM and GARCH(1,1) in terms of scaling distribution preservation over time and investment horizons. In addition, this dissertation uses the noise-data ratio to improve the Holder-Hurst identification for the power spectrum method. Identified distributions of all simulated processes are compared with the empirical distributions in snapshot and over time-scale (frequency) analyses. The findings suggest that the simulated MMAR can replicate all attributes of the empirical distributions, while the simulated GBM and GARCH(1,1) processes cannot preserve the thick-tails, high peaks, and skewness. The wavelet scalograms, used to investigate the variance over time and scales, reveal the superiority of the MMAR for modeling the Treasury rates over the GBM and GARCH(1,1). When the MMAR is applied to the Fed Funds rate, the results are surprisingly different from those of the Treasury rates. The MMAR at this stage cannot produce a complete term structure model, because it cannot completely model the dynamic structure of the term structure.
Cornelis Los (Advisor)
162 p.
Multifractality; Term Structure; Interest Rate Modeling; MMAR; Simulations; Treasury Rate

Recommended Citations

Citations

  • Jamdee, S. (2005). MULTIFRACTAL MODELS AND SIMULATIONS OF THE U.S. TERM STRUCTURE [Doctoral dissertation, Kent State University]. OhioLINK Electronic Theses and Dissertations Center. http://rave.ohiolink.edu/etdc/view?acc_num=kent1115064950

    APA Style (7th edition)

  • Jamdee, Sutthisit. MULTIFRACTAL MODELS AND SIMULATIONS OF THE U.S. TERM STRUCTURE. 2005. Kent State University, Doctoral dissertation. OhioLINK Electronic Theses and Dissertations Center, http://rave.ohiolink.edu/etdc/view?acc_num=kent1115064950.

    MLA Style (8th edition)

  • Jamdee, Sutthisit. "MULTIFRACTAL MODELS AND SIMULATIONS OF THE U.S. TERM STRUCTURE." Doctoral dissertation, Kent State University, 2005. http://rave.ohiolink.edu/etdc/view?acc_num=kent1115064950

    Chicago Manual of Style (17th edition)

kent1115064950
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© 2005, all rights reserved.
This open access ETD is published by Kent State University and OhioLINK.