Abstract

NUNEZ, José Antonio  and  ORTEGA, Elizabeth. Continuous Time Models of Interest Rate: Testing Peso-Dollar Exchange Rate. Econ: teor. práct [online]. 2011, n.34, pp.43-63. ISSN 2448-7481.

As an extension of the article by Núñez, De la Cruz and Ortega (2007), different parametric models with jumps are tested with the methodology developed by Ait-Sahalia and Peng (2006), based on the transition function. Data analyzed are the peso-dollar exchange rate. The idea is to implement continuous-time parametric models to the peso-dollar exchange rate. The results confirm that no continuous time model are not accurate enough to explain the behavior that describes the peso-dollar exchange rate, however, considering some continuous time models with Poisson jumps is possible to describe such behavior.

Keywords : exchange rate; jumps; transition density.

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