CONTINUOUS-TIME GARCH (COGARCH) MODELING OF TURKISH INTEREST RATES

Yıl 2011, Cilt: 3 Sayı: 1, 199 - 208, 01.06.2011

Selcuk Bayraci Gazanfer Unal

Öz

We proposed a continuous time GARCH known as COGARCH(p,q) model for modeling the volatility of Turkish interest rates. COGARCH (p,q) models have been statistically proven successful in capturing the heavy-tail behaviour of the interest rates . We demonstrate the capabilities of COGARCH(p,q) model by using Turkish short rate. The Turkish Republic Central Bank’s benchmark bond prices are used to calculate the short-term interest rates between the period of 15.07.2006 and 15.07.2008. COGARCH(1,1) model is chosen as best candidate model in modeling the Turkish short rate for the sample period

Anahtar Kelimeler

interest rate models, continuous-time models, stochastic volatility, Lévy process, GARCH , COGARCH

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