Template-type: ReDIF-Paper 1.0
Author-Name: Sonia Benito
Author-Email: soniabm@ccee.ucm.es
Author-Workplace-Name: Dpto. de Economía Cuantica, Universidad Complutense
Author-Name: Alfonso Novales Cinca
Author-Email: anovales@ccee.ucm.es
Author-Workplace-Name: Dpto. de Fundamentos de Análisis Económico II, Universidad Complutense
Title: A factor analysis of volatility across the term structure: the Spanish case
Abstract: We show how the term structure of volatilities for zero-cupon interest rates from the Spanish 
	secondary debt market can be explained by a reduced number of factors. This factor representation 
	can be used to produce time series volatilities across the whole term structure. As an alternative, 
	volatilities can also be derived from a factor model for interest rates themselves. We find evidence 
	contrary to the hypothesis that these two procedures lead to statistically equivalent time series, 
	so that choosing the right model to estimate volatility is far from trivial. The volatility factor 
	model fits univariate EGARCH volatility time series much better than the interest rate factor model 
	does. However, observed differences seem to be of little consequence for VaR estimation on zero coupon 
	bonds.
Keywords: analysis of volatility. 
Length: 30 pages 
Creation-Date: 2005
X-File-Ref: http://america.sim.ucm.es/repec/ucm/ref/doicae0502.txt
File-URL: https://eprints.ucm.es/id/eprint/7872/1/0502.pdf
File-Format: Application/pdf
Handle: RePEc:ucm:doicae:0502