Bootstrap Unit Root Tests for Nonlinear Threshold Models

Date

2010-05-17

Author

Yıldırım Kasap, Dilem
Becker, Ralf
Osborn, Denise R.

Metadata

Show full item record

This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

Item Usage Stats

139
views

0
downloads

This paper empirically analyses the interest rate transmission mechanism in the United Kingdom by exploring first the pass-through of the official rate to the money market rate and then that of the market rate to the mortgage rate. The focus is on the possibility of asymmetric adjustment in the pass-through process arising from financial market conditions and monetary policies. Empirical results indicate substantial asymmetries in both steps of the process on the basis of a nonlinear threshold error-correction model, which is motivated entirely by non-standard bootstrap-based tests that take into account the discrete nature of changes in the official rate. Despite the complete pass-through in the long-run, it appears that responses of the money market rate to changes in the official rate are driven by the previous period’s market rate change. On the other hand, market rate changes are not completely reflected in the mortgage rate in the long-run, with short-term mortgage rate responses depending on whether changes in the market rate are motivated by official rate changes. Furthermore, generalized impulse response function analysis uncovers that adjustments differ with regard to the sign and magnitude of interest rate changes in a consistent way with the interbank and mortgage market conditions of the study period.

URI

https://hdl.handle.net/11511/100780

Conference Name

Royal Economic Society 2010 Conference

Collections

Department of Economics, Conference / Seminar

Suggestions

OpenMETU
Core

A threshold cointegration analysis of interest rate pass-through to UK mortgage rates Becker, Ralf; Osborn, Denise R.; Yıldırım Kasap, Dilem (2012-11-01) This paper empirically analyses the interest rate transmission mechanism in the United Kingdom by exploring the pass-through of the official rate to the money market rate and of the market rate to the mortgage rate. Potential asymmetries, due to financial market conditions and monetary policy, lead to the use of a nonlinear threshold error-correction model, with hypothesis tests based on nonstandard bootstrap procedures that take into account the discrete nature of changes in the official rate. The empirica...
Computation of Hedging Coefficients for Mortgage Default and Prepayment Options: Malliavin Calculus Approach YILMAZ, BİLGİ; Kestel, Sevtap Ayşe (2019-11-01) This study explores the hedging coefficients of the financial options to default and to prepay embedded into mortgage contracts based on the change in spot rate, underlying house price and its volatility. In the computations, the finite-dimensional Malliavin calculus is applied since the distribution of both options is unknown and their payoffs are non-differentiable. Naturally, the hedging coefficients are obtained as a product of option's payoff and an independent weight, which permits the user to derive ...
Stochastic volatility and stochastic interest rate model with jump and its application on General Electric data Celep, Betül; Hayfavi, Azize; Department of Financial Mathematics (2011) In this thesis, we present two different approaches for the stochastic volatility and stochastic interest rate model with jump and analyze the performance of four alternative models. In the first approach, suggested by Scott, the closed form solution for prices on European call stock options are developed by deriving characteristic functions with the help of martingale methods. Here, we study the asset price process and give in detail the derivation of the European call option price process. The second appr...
Analyzing Housing Market Dynamics using Linear and non-Parametric Models Yılmaz, Bilgi; Yerlikaya Özkurt, Fatma; Kestel, Sevtap Ayşe (2018-10-07) This paper analyzes the dynamic effect of macroeconomic indicators, such as financial and commodity market indicators on national housing markets. Furthermore, it does not only focus on the impact of the variables but also introduces a variety of models that based on the generalized linear models and multivariate adaptive regression splines. The models help us to identify the macroeconomic drivers of housing markets. Since the US has an adequate housing market data, the empirical analysis within the paper f...
Calibration of stochastic models for interest rate derivatives Rainer, Martin (Informa UK Limited, 2009-01-01) For the pricing of interest rate derivatives various stochastic interest rate models are used. The shape of such a model can take very different forms, such as direct modelling of the probability distribution (e.g. a generalized beta function of second kind), a short-rate model (e.g. a Hull-White model) or a forward rate model (e.g. a LIBOR market model). This article describes the general structure of optimization in the context of interest rate derivatives. Optimization in finance finds its particular app...

Citation Formats

D. Yıldırım Kasap, R. Becker, and D. R. Osborn, “Bootstrap Unit Root Tests for Nonlinear Threshold Models,” presented at the Royal Economic Society 2010 Conference, London, İngiltere, 2010, Accessed: 00, 2022. [Online]. Available: https://hdl.handle.net/11511/100780.